Pakistan market witnesses 18 percent increase in daily trading volume

At Pakistan Stock Exchange, volatility on concerns regarding domestic politics and jitters from global monetary policies failed in deterring investor, if  a few chose to take an exit others were more than willing to enter. This is evident from the fact that that the benchmark index posted a marginal decline of 1.44%WoW and the market closed the week ended on 23^rd September 2016 at 39,782, not too far from coveted 40,000 level.

Volumes remained robust with daily average for the week rising close to 728 million shares (up 18%WoW), though concentrated in sideboard scrips with leaders for the week included: WTL, PACE, BOP, DSFL and TRG. Foreign selling persisted with outflows for the week exceeding US$16 million as compared to US$4.5 million in the previous five sessions. Leaders at the bourse were: HCAR, MTL, ASTL, EPCL and FATIMA; laggards were LOTCHEM, DAWH, SNGP, AKBL and FFC.

Key news flows of the week included: 1) PIB auction yields remained largely stable with GoP raising Rs219 billion, 2) World Bank approved US$390 million loan for Tarbela fifth extension project, 3) current account deficit for 2MFY17 touched US$1.3 billion, an increase of 92%YoY, 4) news reports indicated that Shanghai Electric Power has qualified as final bidder for an estimated US$1.6 billion stake in KEL while the latter announced its intention to acquire 40.25% stake in KAPCO and 5) Ministry of Industries and Production decided to seek approval of the ECC for further reduction in urea prices in order to offload 1.5 million tons of stock. Pakistan’s central bank is scheduled to release its monetary policy statement later on Saturday; with wider expectations no change in interest rate. It is likely to remain a non‐event for the market. Political risks remain in place with PTI’s protest set for next week likely keeping investors cautious. On the global front, following no reduction in interest rate by the US Fed, the focus will now remain on oil producers’ meeting next week, which is also likely to fail in arriving at any consensus at containing output.

Rising sharply, Pakistan posted current account deficit for August'16 at US$721 million compared to US$595 million a month ago. Consequently, 2MFY17 deficit accumulated to US$1.32 billion rising 92%YoY due to 1) rising trade deficit as imports growth accelerated, 2) remittances were still 3%YoY lower in 2MFY17 despite recovery during the month under review and 3) absence of US$337 million CSF payments received in first two months of the current financial year. According to details, imports grew at 13.9%YoY on the back of higher machinery imports (up 85%YoY) while exports continued to slump (down 9.35% YoY) keeping trade deficit at US$2.67, 35.5%YoY higher. Remittance flows normalized to US$1.76 billion for the month, up 15.3%YoY/32.5%MoM. Going forward, analysts expect trade deficit weakness to persist, which accompanied by the deceleration in remittances growth is likely to keep current account deficit higher during the ongoing fiscal year, if no remedial steps are taken to boost exports and remittances.