Pakistan Stock Exchange Witnesses Quantum Jump in Average Daily Trading Volume

During the week ended 20^th April, 2017, Panama case verdict cleared political uncertainty along with upcoming MSCI inclusion, positive sentiments are likely to prevail going forward. Ongoing results season is likely to accelerate momentum, while budgetary proposals can direct market performance accordingly. The key news flow during the week included: 1) Net foreign direct investment (FDI) soared 12.4%YoY to US$1.6 billion during first nine months of current financial year, 2) FY18 federal budget would be presented on May 16’17 as announced by Finance Minister, 3) Current account deficit increased by 161%YoY to US$6.13 billion during nine months of current financial year, 4) ASTL announced expansion in steel melting/rolling mill capacity by 200,000/270,000 tons per annum and 5) GoP rejected all bids in the latest PIB auction held on 19^th April. Average daily trading volume increased by 62.44%WoW to 277.66 million shares where volume leaders of the week were: EPCL, TRG, KEL, ASL (63.4mn shares), and 5) BOP (48.5mn shares).Top performers during the week were: SNGP, ASTL, CHCC, HASCOL, and HCAR, while from the main board only MCB ended up in the red zone.

The current account deficit (CAD) reduced to US$562 million in March’17 from US$822 million in February’17 (down 32%MoM). Despite slight increase in trade deficit (+0.85%MoM), the monthly improvement came on the back of higher remittances in March’17 amounting to US$1.69 billion, recording sequential rise of 20%MoM. However, current account dynamics remain considerably weaker on YoY basis, with US$122 million surplus recorded in March'16, due to continued escalation in imports (+34%YoY to US$4.3 billion) particularly on higher auto/machinery imports and higher crude oil prices. The cumulative CAD for 9MFY17 surged to US$6.1 billion, posting an increase of 161%YoY bringing the deficit close to 1.9% of the GDP. This reflects weak trade dynamics. Going ahead, current account is expected to continue its downward slide on account of falling exports, rising imports and remittances remaining flat.

FFBL is scheduled to announce earnings for 1QCY17 on Monday, 24^th April where AKD Securities expects the company to post net loss of Rs97 million (LPS: Rs0.10) as compared to a net loss of Rs514 million (LPS: Rs0.55) for 1QCY16. This reduction in loss is expected on the back of: 1) a 19% YoY increase in topline to Rs5.24 billion reflecting 54%YoY likely increase in DAP off‐take to 109,000 tons and 2) improvement in gross margin (GM) to 12.7% for 1QCY17 due to significant decline in phosphoric acid prices diluting the effect of significant reduction in DAP prices due to depressed international prices.

EFERT is also scheduled to announce its quarterly financial results on the same day. The brokerage house expects EFERT's earnings to nosedive to Rs1.19 billion (EPS: Rs0.90), down 44%YoY. The decline in earnings is expected on the back of: 1) GM declining to 33.2% on account of reduction in urea prices (down 9%YoY) due to depressed farm economics and low international prices, down  by 10%YoY to an average of US$210/ton in 1QCY17.