PSX Index closes the week at the historic high

Pakistan Stock Exchange (PSX) remained volatile throughout the week ended on November 29, 2024. This led to the KSE-100 index registering its highest ever intra-day gains of 4,695 points on Wednesday, and closing at a record high of 101,357 points on Friday, marking an increase of 3.6%WoW.

The volatility stemmed from acceleration in political instability amid opposition party reaching to protest in the country’s Capital, creating uncertainty amongst the investor, leading to a major fall in benchmark index, marking a decrease of 3,506 points on Tuesday. However, market regained its momentum on Wednesday after the protestors started to back off from Islamabad and the momentum was further fueled by a circular from the State Bank of Pakistan (SBP), removing the MDR requirements on deposits held by Commercial banks of financial institutions and public sector enterprises. This led to the KSE-100 index registering its highest ever intra-day gains of 4,695 points on Wednesday, and closing at a record high of 101,357 points on Friday, marking an increase of 3.6%WoW.

Major contributing sectors to this rally were commercial banks, contributing 1,675 points, followed by Technology & Communication with 349 points, and Oil & Gas Exploration, which added 283 points during the week. However, with another circular from the SBP revising its guidelines for profit sharing on saving deposits for Islamic Banking Institutions (IBIs), which resulted in MEBL eroding 439 points during the week.

Secondary market yields on the 6-month bill decreased to 12.12%, dropping to the lowest levels seen in over 2.5 years.

Foreign exchange reserves held by SBP increased by US$131 million WoW, ending the week at US$11.4 billion as of November 22, 2024.

Average daily trading volume remained higher, up by 39.8%WoW, rising to 1.4 billion shares, as compared to 990.7 million shares traded a week ago.

PKR witnessed a meagre depreciation of 0.1% against the greenback during the week to close at 278.05PKR/US$.

Other major news flow during the week included, 1) SBP receives US$500 million from ADB under climate resilience program, 2) IT Ministry released incentive plan for semiconductor industry, 3) Pakistan, Belarus announced to boost ties with 8 MoUs, and 4) the GoP formed a body to oversee Reko Diq deal.

Property, Leather & Tanneries, Oil & Gas Marketing Companies, Technology & Communication and Exchange Traded Funds were amongst the top performing sectors, while Jute, Woollen, Transport, Automobile Assembler & INV.Banks/ INV.Cos/ Securities Cos. were amongst the worst performers.

Major selling was recorded by Foreigners with a net sell of US$15.1 million. Insurance Companies absorbed most of the selling with a net buy of US$10.6 million.

Top performing scrips of the week were: BOP, AKBL, HBL, JVDC, and MEHT, while laggards included: MEBL, FABL, PSEL, SAZEW, and GHGL.

Continuation of monetary easing due to disinflationary environment and improving macroeconomic environment would make investment in equities more appealing, currently trading at P/E of 4.9x and DY of 10.2%.

Aforementioned factors, along with declining external financing requirement under the IMF program, would keep foreigners’ interest alive.

AKD Securities recommends sectors that benefit from monetary easing and structural reforms. However, modest economic recovery may limit the upside for cyclicals.

The top picks of the brokerage house include, OGDC, PPL, MCB, FFC, PSO, LUCK, MLCF, FCCL and INDU.

 

 

PSX daily trading volume up 30.6%WoW

Pakistan Stock Exchange (PSX) started the week on a strong note, with KSE-100 index reaching its highest-ever closing at 90,864 points on Tuesday, closing the week ended on November 01. 2024 at 90,859, up by 0.96%WoW. Average daily traded volume was up 30.6%WoW to 649.2 million shares, from 497.1 million shares traded a week ago.

The momentum was fueled by anticipated continuation of monetary easing and the country reporting its first-ever quarterly budget surplus in over 20 years of PKR1.7 trillion during 1QFY25, coupled with strong corporate results.

Regrettably, Pakistan missed two of the IMF's quarterly targets: tax collection marking a shortfall of PKR90 billion, and cash surplus for the provinces, marking a shortfall of PKR182 billion.

CPI for the month was reported at 7.2%YoY, with real interest rate comfortably above 10% at current policy rate levels.

Trade deficit for October 2024 was reported at US$1.4 billion, with exports for the month at US$2.97 billion, up 4.9%MoM.

Foreign exchange reserves held by State Bank of Pakistan (SBP) increased by US$116 million WoW at US$11.15 billion as of October 25, 2024.

On the currency front, PKR largely remained stable against the greenback throughout the week, closing the week at PKR277.7 to a US$.

Other major news flow during the week included: 1) Prime Minister visited Saudi Arabia and Qatar, 2) Saudi Arabia likely to finalize US$1.2 billion oil facility by end December this year, 3) Germany seeks COAS help over IPP deal termination, 4) MoUs signed with Pakistan increased to 34 and 5) T-Bills yields slip by 64-140bps ahead of inflation data.

Pharmaceutical, Wollen, and Leasing Companies were amongst the top performing sectors, while Inv.Banks/ Inv.Cos/ Securities Companies, Leather & Tanneries, and Engineering were amongst the laggards.

Major net selling was recorded by Banks/DFI with a net sell of US$13.0 million. Insurance and Mutual Funds absorbed most of the selling with an aggregate net buy of US$12.3 million.

Top performing scrips of the week were: GLAXO, CHCC, NCPL, SYS, and KAPCO, while top laggards included: KOSM, NBP, PKGS, MUGHAL, and SRVI.

Market is expected to remain positive, with primary focus on the upcoming Monetary Policy Committee meeting, where an anticipated rate cut could further bolster market momentum.

Despite the recent rally, valuations remain attractive, with the market trading at a P/E of 4.0x and offering a dividend yield of 11.4%.

AKD Securities recommend focusing on sectors that stand to benefit from monetary easing and structural reforms, particularly high-dividend-yield stocks that are likely to re-rate as yields converge with fixed-income returns.

Top picks of the brokerage house include: OGDC, PPL, MCB, UBL, MEBL, FFC, PSO, LUCK, MLCF, FCCL and INDU.

 

 

 

PSX benchmark index inches closer to 90,000

Pakistan Stock Exchange (PSX) witnessed bullish sentiments throughout the week ended on October 25, 2024. The benchmark KSE-100 index recorded its highest-ever closing, just shy of the 90,000 mark ‑ closing at 89,994 points, up by 5.6%WoW.

This marked the highest weekly return in 27 weeks and 47th highest weekly return since the index's inception.

More importantly, KSE30 index also reached all-time high at 28,395 points.

The week started with positive momentum buoyed by settlement of political noise following the passage of stalled 26th Constitutional Amendment.

The optimism consolidated with swing of corporate result announcements and favorable economic developments.

According to AKD Securities, the rally was broad-based, with 80 out of 100 companies delivering positive returns.

Leading sectors were Fertilizer, Cement, and Banks, primarily due to strong annual growth in results. On the macro front, current account posted a surplus for the second consecutive month at US$115 million for September 2024.

Foreign exchange reserves held by State Bank of Pakistan (SBP) increased by US$18 million to US$11.0 billion as of October 18, 2024.

Market participation also improved significantly, with average daily traded volume rising by 23%WoW to 532 million shares from 432 million shares a week ago.

The PKR remained stable against the greenback, closing the week at 277.6 to a US$.

Other major news flows during the week included: IT exports surged 42%YoY in September 2024, 2) Banking sector deposits were up by 19%YoY to PKR31.3 trillion at end September 2024, 3) Sales tax on tractors hiked to 14% from 10%, 4) Loans to private sector were up 4.9% to PKR8.4 trillion at end September 2024, and 5) Nepra approves KE's generation tariff with key adjustments.

Cement, Refinery, and Mutual Funds were amongst the top performers, while Modarabas, Textile composites, and Vanaspati & allied industries were amongst the worst performers.

Major net selling was recorded by Foreigners with a net sell of US$16.4 million. Mutual Funds and other organizations absorbed most of the selling with a net buy of US$20.4 million.

Top performing scripts of the week were: KOHC,CHCC, AICL, KEL, and ATRL, while laggards included: ILP, PIBTL, LOTCHEM, IBFL, and NESTLE.

Market is expected to remain positive, with primary focus on the upcoming MPC meeting, where an anticipated rate cut could further bolster market momentum.

Despite the recent rally, valuations remain attractive, with the market trading at a P/E of 4.0x and offering a dividend yield of 11.2%.

AKD Securities recommends focusing on sectors that stand to benefit from monetary easing and structural reforms, particularly high-dividend-yield stocks that are likely to re-rate as yields converge with fixed-income returns.

Top picks include, OGDC, PPL, MCB, UBL, MEBL, FFC, PSO, LUCK, MLCF, FCCL and INDU.

 

PSX witnesses 16.5%WoW decline in average daily trading volume

Pakistan Stock Exchange (PSX) remained volatile during the week, with the benchmark index losing 233 points or 0.3WoW to close at 85,250 points on Friday, October 18, 2024.

Commercial Banks and Power sectors were the primary drags on the index, as concerns over additional ADR-based taxation to weigh on banks’ expected profitability for the last quarter, while continued government scrutiny on IPPs added pressure to the Power sector.

Fertilizer sector also remained laggard due to lower than expected payouts by EFERT.

On the political front, the successful conclusion of the SCO summit was a positive development. However, heightened political noise towards the weekend kept market sentiments subdued.

Textiles and food exports remained elevated.

Foreign exchange reserves held by the State Bank of Pakistan (SBP) crossed the US$11 billion mark for the first time in last two and half years, as of October 11, 2024.

In the T-Bills auction held on Wednesday, GoP raised PKR716 billion as against a target of PKR400 billion, with 3 and 6 month yields falling to 15.3% and 14.3%, respectively.

In its recent fortnightly review, GoP hiked diesel prices by PKR5/litre, while keeping petrol prices unchanged.

Market participation plunged by 16.5%WoW, with average daily traded volume dropping to 432 million shares from 518 million shares in the earlier week.

On the currency front, the PKR remained largely stable against the greenback, closing the week at PKR277.6 to a greenback.

Other major news flows during the week included: 1) GoP pays off PKR1.2 trillion domestic debt in first quarter of the current financial year, 2) Roshan Digital Accounts surpass US$8.749 billion in remittances, 3) LSM output rises by 4.68MoM in August, and 4) Urea off takes decline by 35YoY in September.

Tobacco, Close-end Mutual Funds, and Engineering were amongst the top performing sectors. Woollen, Property, and Transport were amongst the worst performers.

Major selling was led by Banks, with a total outflow of US$16.6 million, primarily due to NBP offloading its entire stake in AGL to FFC. Foreigner followed with net sell of US$11.1 million.

Companies absorbed most of the selling with a net buy of US$25.8 million.

Top performing scrips of the week were: ATRL, PAKT, HGFA, FCEPL, and JDWS, while laggards included: NPL, JVDC, BNWM, KAPCO, and PIOC.

Market is expected to remain positive going forward, supported by declining interest rates, anticipated to continue channeling investment flows into equities.

Additionally, with the ongoing earnings season, corporate results would stay in focus.

Despite the recent upward trend, the market remains attractively valued, currently trading at a P/E of 3.7x with a dividend yield of 11.9%.

AKD Securities proposes focusing on sectors that are likely to benefit from monetary easing and structural reforms, particularly high dividend yield stocks, likely to re-rate as yields converge with fixed income returns. Top picks include, OGDC, PPL, MCB, UBL, MEBL, FFC, PSO, LUCK, MLCF, FCCL and INDU.

 

PSX daily trading volume declines 17%WoW

Pakistan Stock Exchange (PSX) remained volatile throughout the week, with the benchmark index losing 782 points or 0.95%WoW to close at 81,292 points on Friday, September 27, 2024.

Anticipation of the IMF’s board approval scheduled for September 25, briefly improved investors’ sentiment on Wednesday. However, the positive sentiments were overshadowed by continuation of foreign selling after rebalancing of FTSE Russell, political noise, and concerns regarding the potential termination of contracts with certain IPPs, inducing selling pressure in power sector heavyweights.

Consequently, power generation and distribution sector contributed the significant decline, eroding 800 points from the index during the week.

The FBR is expected to post a shortfall of PKR275 billion in 1QFY25, according to the news flows. In efforts to increase tax revenue, GoP plans to abolish non-filer status and take strict measures against tax frauds.

Average daily trading volumes declined by 17.1%WoW to 389.35 million shares, as compared to 469.45 million shares traded a week ago.

Foreign exchange reserves by State Bank of Pakistan (SBP) increased by US$24 million to US$9.53 billion as of September 20, 2024.

On the currency front, PKR largely remained stable against the greenback throughout the week, closing the week at 277.64 to US$.

Other major news inflow during the week included: 1) IMF distanced itself from Pakistan's decision to arrange a US$600 million commercial loan at 11% interest rate, 2) US Assistant Secretary of State Donald Lu praises 'deeper' ties with Shehbaz government, 3) GoP borrowing surged to record high, 4) Farmers to get 251 green tractors and 5) ADB may approve 3rd-party guarantee in case of Reko Diq.

Transport, Fertilizer, Inv. Banks/ INV. Cos/ Securities Cos., Leather & Tanneries and Pharmaceuticals were amongst the top performers, Power generation & Distribution, Leasing companies, Textile spinning, Engineering and Jute were amongst the worst performers.

Major net selling was recorded by Foreigners with a net sell of US$12.44 million, mostly absorbed by Mutual Funds with a net buy of US$16.21 million.

Top performing scrips of the week were: FFC, GLAXO, AKBL, FFBL, and THALL, while the laggards included: HUBC, PGLC, SML, MARI, and KEL.

Following the approval of the IMF’s executive board and the subsequent receipt of the first tranche of US$1.02 billion, the market sentiments are poised to improve.

Additionally, easing inflation with September 2024 CPI expected at 7.0%YoY, coupled with ongoing monetary easing, is expected to keep equities in focus.

AKD Securities recommends sectors benefiting from monetary easing and structural reforms, particularly high-dividend-yielding stocks, which are expected to rerate as yields align with fixed income returns.

 

Pakistan Stock Exchange benchmark index declines 2.61%WoW

Pakistan Stock Exchange experienced volatility throughout the week ended on July 29, 2024, heavily influenced by political noise. The benchmark index lost 2,088 points 0r 2.61%WoW at close at 78,029 points.

With Pakistan's agenda yet to be included in the IMF board meeting, authorities are focusing on fulfilling other external financing requirements, with efforts including visit to China for possible debt rescheduling, especially of power producers.

The Finance Minister engaged with global rating agencies, Fitch and Moody's, aiming for a possible improvement in the country's credit rating to facilitate capital raising through external sources.

In the last T-Bills auction, yields dropped by 30-56 bps, indicating market expectations of a 50-100bps cut in the upcoming Monetary Policy Committee (MPC) meeting on Monday. However, experts anticipate the MPC to maintain the status quo due to the re-emergence of strong inflationary pressures from food supply disruptions and recently announced revenue measures in the FY25 budget.

The July 2024 inflation is expected to clock in at 10.96%YoY as compared to 12.57%YoY in the preceding month. On the external front, foreign exchange reserves held by the central bank declined by US$397 million to US$9.03 billion as at July 19, 2024.

With the said volatility in market, participation decreased by 27.3%WoW, with the average daily traded volume falling to 337 million shares, from 464 million shares a week ago.

On the currency front, PKR largely remained flat against the greenback throughout the week, closing the week at 278.3/US$.

Other major news flows during the week included:1) Forex reserves declined by US$369 millio, 2) Income estimates slashed to PKR9.1 trillion, 3) Auto financing registered downward trend for second straight year and 4) GoP announced to pull out of fuel pricing process, giving OMCs free hand.

Leasing, Vanaspati & allied industries and Textile spinning were amongst the top performers, while ETF’s, Inv. Banks/ cos., and Jute were amongst the worst performers.

Major net selling was recorded by mutual funds with a net sell of US$5.0 million. Foreigners and insurance co. absorbed most of the selling with a net buy of US$4.6 million and US$4.4 million, respectively.

Top performing scrips of the week were: PAKT, GADT, JVDC, FFBL and LCI, while laggards included: NCPL, NPL, KAPCO, INIL and FCEPL.

Going forward, market’s focus will primarily be on the MPC meeting scheduled for Monday, with any rate cut to boost investor’s confidence and draw increased attention to the cyclical sector.

Additionally, the anticipated approval from the IMF executive board next month is likely to support bullish momentum.

Sectors benefiting from monetary easing and structural reforms would remain in the limelight.

Pakistan: Kitchen Cabinet of PM Shehbaz Sharif

President Asif Ali Zardari on Monday administered the oath to the 19-member federal cabinet of newly elected Prime Minister Shehbaz Sharif.

The PML-N’s main ally, the PPP, has refused to become part of the federal cabinet.

The cabinet includes 12 MNAs and three senators as federal ministers, as well as a minister of state. Three technocrats — Muhammad Aurangzeb, Mohsin Naqvi and Ahad Cheema are also included in the cabinet.

A press release from the information ministry elaborated on the various portfolios assigned to the federal ministers.

Federal ministers

·         Khawaja Muhammad Asif, MNA — defence, defence production, aviation

·         Mohammad Ishaq Dar, Senator — foreign affairs

·         Ahsan Iqbal Chaudry, MNA — planning, development and special initiatives

·         Rana Tanveer Hussain, MNA — industries and production

·         Azam Nazeer Tarar, Senator — law and justice, human rights

·         Chaudhry Salik Hussain, MNA — overseas Pakistanis and human resource development

·         Abdul Aleem Khan, MNA — privatisation, Board of Investment

·         Jam Kamal Khan, MNA — commerce

·         Amir Muqam, MNA — states and frontier regions, national heritage and culture

·         Sardar Awais Ahmad Khan Leghari, MNA — railways

·         Attaullah Tarar, MNA — information and broadcasting

·         Dr Khalid Maqbool Siddiqui, MNA — science and technology, federal education and professional training

·         Qaiser Ahmed Sheikh, MNA — maritime affairs

·         Mian Riaz Hussain Pirzada, MNA — housing and works

·         Musadik Masood Malik, Senator — petroleum, power

·         Muhammad Aurangzeb — finance, revenue

·         Ahad Khan Cheema — economic affairs, establishment

·         Mohsin Naqvi — interior, narcotics control

Minister of state

·         Shaza Fatima Khawaja

Familiar faces returning include Khawaja Asif, Dar, Ahsan Iqbal, Azam Nazeer Tarar and Musadik Malik.

 

Stock market posts lackluster movement

The week ended on March 08, 2024 started on a positive note, with the index gaining 1% on the opening day. However, as the week progressed, profit taking activities ensued, losing some of the initial gains. Nonetheless, by the week's end, the benchmark index managed to maintain an upward momentum, closing at 65,326 points with a gain of 468 points or 0.7%WoW.

With new Prime Minister taking office and issuing immediate directives focusing on engaging with the IMF and addressing privatization matters set an initial positive impetus. With new setup in place the IMF started rolling out new recommendations and is poised to unveil more with the appointment of the finance minister.

Government’s next major task will be to smoothly navigate the second review of the SBA. IMF’ team is scheduled to visit following the formation of the new cabinet, as SBA program is set to expire in April 2024.

The recent decline in cut-off yields for 3-month papers in last T-bill auction hints volatility, suggesting that some players anticipate a rate cut in the upcoming Monetary Policy Committee meeting on March 18.

Remittances for February totaled US$2.25 billion, up 13%YoY and with trade deficit of US$1.7 billion for the month.

Market participation remained subdued, with the daily traded volume averaging 412 million shares as compared to 418 million shares in the earlier week, down 1.6%WoW.

On the currency front, rupee held its ground against the greenback, closing at PkR279.04/US$.

Other major news flows during the week included; 1) Jul-Jan debt during first seven months of the current financial year rose by 6 percent, 2) SBP injected PKR8 trillion to ease liquidity crunch, 3) Bank deposits surged nearly 21%YoY in February on record-high interest rates and remittances, 4) cement dispatches in February fall 19% to 3.26 million tons, and 5) Textile exports hit US$1.41 billion in February, up 20%YoY.

Sector-wise, Transport, Refinery, and Inv. Banks/ Securities cos. were amongst the top performers, while Tobacco, Modarabas, and Textile weaving were amongst the worst performers.

Major net selling was recorded by Companies with a net sell of US$6.8 million. Foreigners absorbed most of the selling with a net buy of US$6.3 million.

Top performing scrips of the week were: NRL, DAWH, CNERGY, PAEL and PSX, while the laggards included: SML, FCEPL, PAKT, MEBL and SHFA.

The upcoming MPC meeting will remain in the limelight. With prevailing consensus of the status quo, the market is likely to remain largely unaffected as this expectation is already priced in. However, if there is any surprise cut, it could unlock funds towards debt-heavy cyclical sectors.

The imminent announcement of the federal cabinet in the coming week holds significance, with progress on the IMF's SBA third tranche as a near-term focal point and a potential positive in sight.

Pakistan: IMF Reaches Staff Level Agreement

International Monetary Fund (IMF) staff and the Pakistani authorities reached a staff-level agreement on the first review under Pakistan’s Stand-By Arrangement (SBA), subject to approval by the IMF’s Executive Board. Upon approval, Pakistan will have access to SDR 528 million (around US$700 million).

The agreement supports the authorities’ commitment to advance the planned fiscal consolidation, accelerate cost-reducing reforms in the energy sector, complete the return to a market-determined exchange rate, and pursue state-owned enterprise and governance reforms to attract investment and support job creation, while continuing to strengthen social assistance.

An IMF team, led by Nathan Porter, visited Islamabad from November 2-15, 2023, to hold discussions on the first review of Pakistan’s economic program supported by an IMF Stand-By Arrangement (SBA). At the conclusion of the discussions, Porter issued the following statement:

“The IMF team has reached a staff-level agreement (SLA) with the Pakistani authorities on the first review of their stabilization program supported by the IMF’s US$3 billion (SDR2,250 million) SBA. The agreement is subject to approval of the IMF’s Executive Board. Upon approval around US$700 million (SDR 528 million) will become available bringing total disbursements under the program to almost US$1.9 billion.

“Anchored by the stabilization policies under the SBA, a nascent recovery is underway, buoyed by international partners’ support and signs of improved confidence. The steadfast execution of the FY24 budget, continued adjustment of energy prices, and renewed flows into the foreign exchange (FX) market have lessened fiscal and external pressures. Inflation is expected to decline over the coming months amid receding supply constraints and modest demand. However, Pakistan remains susceptible to significant external risks, including the intensification of geopolitical tensions, resurgent commodity prices, and the further tightening in global financial conditions. Efforts to build resilience need to continue.

“In this regard, strengthening macroeconomic sustainability and laying the conditions for balanced growth are key priorities under the SBA. The authorities’ policy priorities include:

Continued fiscal consolidation to reduce public debt, while protecting development needs. The authorities are determined to achieve a primary surplus of at least 0.4 percent of GDP in FY24, underpinned by federal and provincial government spending restraint and improved revenue performance supported, if necessary, by contingent measures. The authorities are building capacity to expand the tax base and raise revenue mobilization and are committed to improving the quality of public investment and spending.

Strengthening the social safety net to better protect the vulnerable. The authorities will continue the timely disbursements for social protection under BISP’s budget allocation—which are about a third higher than in FY23. This will allow for the expansion of the Unconditional Cash Transfers (UCT) Kafaalat program to 9.3 million families this fiscal year, with an annual inflation adjustment of the stipend. Looking forward, the authorities are seeking to improve the UCT Kafaalat generosity level and to increase enrollment into the Conditional Cash Transfers programs supporting children’s education and health.

Further reforms to reduce costs in the energy sector and restore its viability. With the combined circular debt (CD) across power and gas sectors exceeding 4% of GDP, immediate action was critical. While protecting vulnerable consumers, the authorities implemented power tariff adjustments that were pending since July 2023 and increased gas prices after a long time, effective November 01, 2023. While these increases were substantial, they were necessary to avoid further arrears that threatened the viability of these sectors and the provision of critical energy supplies. The authorities are also moving to tackle cost-side pressures, including bringing private sector participation to DISCOs, institutionalizing recovery and anti-theft actions, improving PPA terms, and reducing the incentives for captive power.

Returning to a market-determined exchange rate and rebuilding FX reserves. While inflows following increased regulatory and law enforcement helped normalize import and FX payments and rebuild reserves, the authorities recognize that the rupee must remain market-determined to sustainably alleviate external pressures and rebuild reserves. To support this, they plan to strengthen the transparency and efficiency of the FX market and to refrain from administrative actions to influence the rupee.

Proactive monetary policy to lower inflation toward its target. With appropriately tight monetary policy, inflation should steadily decline and the authorities stand ready to respond resolutely if near-term price pressures reemerge, including due to second-round effects on core inflation or renewed exchange rate depreciation.

Building financial sector resilience. Continued vigilance is warranted to safeguard the soundness of the banking system. Priorities include addressing undercapitalized financial institutions, ensuring foreign exchange exposures within regulatory limits, and aligning bank resolution and crisis management frameworks with best practice.

Continuing state-owned enterprise and governance reforms to improve the business environment, investment, and job creation. Following passage of the State-Owned Enterprises (SoE) law, the authorities are moving forward with their SoE policy and implementation of their triage plan, including the privatization of select SoEs. High governance and transparency standards will apply to the management of assets under the ownership of the newly created Sovereign Wealth Fund (SWF) and the operations of the SIFC. To further strengthen governance, the authorities will ensure public access to asset declarations from Cabinet members and a task force, with participation from independent experts, will complete a comprehensive review of the anticorruption framework.

Deepening cooperation with international partners. The authorities have accelerated the engagement with multilateral and official bilateral partners. Timely disbursement of committed external support remains critical to support the authorities’ policy and reform efforts.

“The IMF team thanks the Pakistani authorities, private sector, and development partners for fruitful discussions and cooperation throughout this mission.”

 

Pakistan stock market closes almost flat

The week ended on August 11, 2023 started on a positive note, but faced volatilities as the week prolonged with the benchmark index closing the week at 48,424 points, reflecting a decrease of 0.33%WoW.

The average daily turnover clocked in at 287 million, down 26.9%WoW. The market capitalization dropped to PKR7,232 billion, from PkR7,290 billion.

Major drivers during the week remained multimillion investment commitments by GCC countries, UAE and Saudi Arabia and the triumphant oversubscription of MTBs much higher than the anticipated pre-auction target.

Furthermore, the total foreign exchange reserves witnessed a 0.9%WoWdecline, additionally workers’ remittances declined by 7.3%MoM and 19.3%YoY to US$2.03 billion in July 2023. Cumulatively remittances for 7MCY23 were reported at US$14.9 billion, down 16.9%YoY.

Other notable news from the week were: 1) CCoE approval for up-gradation for local refineries , 2) transfer of 15 companies to MSCI FM index from the small cap index, and 41 other companies were added to the small cap MSCI Index, 3) emergence of NBP, BoP and U bank as the top agri-microfinance creditors, 4) penetration of local rice traders into the global rice trade nexus as a result of restriction imposed by India on rice export, and 5) dissolution of the national assembly and anticipation of the caretaker govt.

Sector-wise, REFINERY declined by 11%, while INV. BANKS/ INV. COS/ SECURITIES COS. gained 8.3%.

Top performing scrips were: DAWH, AICL, FABL, UBL, and NATF, while laggards included PSMC, HCAR, CNERGY, SML, SEARL, and NRL.

BANKS/DFIs recorded a net sell of US$6.9 million. Insurance Companies absorbed all of the selling with a net buy of US$6.4mn.

The market is expected to portray positivity, while the installation of the caretaker government and the relation it fosters with IMF are likely to usher in market stability.

Despite a significant upside, market still remains attractive. Additionally, the influx of investments from UAE and Saudi can bolster and affirm stability.

Market participants are advised to implement a cautious approach when investing while focusing on dollar denominated revenue stream companies like E&Ps and Technology to hedge against currency risk or in companies with healthy dividend yields.

Pakistan Stock Exchange benchmark index posts 6.65%WoW gain

The week ended on July 07, 2023 started on a very positive note, with the market going up 2,000 points from the opening bell and closed the day at 43,899 points.

The rally was mainly driven by the positive sentiment coming out from the Eid Holidays as the country’s authorities reached Staff Level Agreement with the IMF on June 30, 2023. Overall, market ended gaining 2,754 points or 6.65%WoW during the week, breaking the 44,000 barrier during Thursday's trading session, up 660 points in intraday trade.

The market capitalization rose to PKR6,685 billion, up from PKR6,361 billion. In terms of volume, WTL topped the list with 162.97 million, followed by CNERGY with 103.65 million shares.

Foreign exchange reserves held by State Bank of Pakistan (SBP) rose to US$4.5 billion on June 30, from US$4.07 billion on June 23, reflecting an increase of 10%WoW. Total liquid reserves on June 30 were reported at US$9.7 billion, representing an increase of 4%WoW. Moreover, CPI for June 2023 clocked at 29.40%YoY.

Other notable news for the week include: 1) price of petrol was left unchanged at PKR262 per litre, whereas the price of High Speed Diesel was raised to PKR260.5 (effective beginning July); 2) Pakistan’s trade deficit for June 2023 was reported at US$1.81 billion as compared to US$2.13 billion a month ago; 3) the GoP increased advance income tax rate for commercial importers to 6%, from 5.5%; 4) IMF put Pakistan’s external funds requirement at US$91.5 billion over the next three years; 5) the GoP’s total debt skyrocketed to PKR58.96 trillion in May 2023 due to the increased domestic and external borrowing; 6) SBP reserves further increased by US$ 393 million to US$4.463 billion; 7) Saudi Arabia invested US$0.59 billion under SIFC; 8) Pak Eurobond yields witnessed a significant increase on a MoM basis.

Sector wise, Modarabas/Leasing Companies/Synthetic & Rayon have been worst performers, whilst Refinery remained an anomaly.

Top performing scrips of the week were: NRL, AIRLINK, AVN, UNITY, and INIL, while top laggards were: PGLC, IBFL, GADT, EFUG, and PAKT.

Flow-wise, major net selling was recorded by Banks/DFIs with a net sell of US$5.48 million. Insurance Companies absorbed most of the selling with a net buy of US$5.72 million.

After the bullish end to the previous week, market participants await further clarity regarding the IMF bailout package. The market may observe momentum once the lender concludes its board meeting on July 12, 2024. It is believed that the country's impending risk of default diminish before the market can establish its direction.

Analysts reiterate stance to follow a cautious approach while picking up scrips and continue to advocate dollar-denominated revenue stream scrips (Tech and E&P sector) to hedge against currency risk or high dividend-yielding scrips.

  

 

 

 

 

Pakistan Stock Exchange benchmark index posts 1.6%WoW increase

Market remained in green throughout the week ended on May 05, 2023 as buyback announcements from LUCK and HBL’s Sponsors boosted investor’s confidence.

The benchmark index gained 661 points during the week to close at 42,242, posting 1.6%WoW increase. Participation also witnessed an increase of 17.5%WoW as average daily trading volume rose to 244.5 million shares as compared to 208.0 million shares a week ago.

On the macro front, IMF reviews still hang in the balance and as the Fund will review the budget plans for upcoming year.

While political instability still persists, as deadlock remains on the election dates between PTI and the incumbent government.

Internationally, crude oil prices dropped during the week due to lower than anticipated demand from China and FED rate hike by 25bps. WTI/Brent declined by 8.0%/8.1%WoW to currently trade at US$70.6/74.7/bbl, respectively.

Foreign exchange reserves of Pakistan remained largely flat on a weekly basis to US$4.46 billion as of April 28, 2023.

PKR remained stable during the week to close at PkR283.59 to a US$, a gain of 0.1%WoW.

Other major news flows during the week included: 1) Trade deficit for first 10 months of FY 23 declined 39.62%YoY to US$23.71 billion, 2) Food pushes inflation was record at 36.4% in April, 3) FBR suffers shortfall of over PKR100 billion in April, 4) POL products sale in April declined 46%YoY to 1.17 tons, 5) April cement dispatches declined 16.55%YoY to 2.95 million tons, 6) Circular debt crossed PKR4 trillion mark.

Synthetic & Rayon, Woollen, and Leasing Companies were amongst the top performers, while Fertilizer, Property, and Refinery were amongst the worst performers.

Flow wise, major selling was recorded by Foreigners with a net sell of US$6.1 million. Individual absorbed most of the selling with a net buy of US$8.0 million.

Top performing scrips during the week were: PGLC, IBFL, PKGS, UPFL, and LUCK, while the laggards included: ENGRO, DAWH, PAKT, JVDC, and JDWS.

Going forwards, any positive development on the IMF front and political stability would further boost the investor’s confidence. However, market upside is expected to remain limited due to record high interest rates in the country and rampant inflation.

Analysts advise investors to take a cautious approach while building positions in the market and continue to advocate the stocks with dollar-denominated revenue streams (Technology and E&P sector), to hedge against the currency risks or companies with healthy forward dividend yields.

Pakistan Stock Exchange benchmark index dips 1.67%WoW

The benchmark index of Pakistan Stock Exchange (PSX) lost 684 points during the week ended on January 13, 2023, registering a 1.67%WoW drop to close at 40,323 points. Overall, participation improved with average trading volumes rising to 183 million shares, from 176 million shares traded in the earlier week, posting an increase of 4%WoW.

The index witnessed an overall volatile week, as news flows of reserves falling below US$4.5 billion dampened overall sentiment, alongside the obvious political noise.

Some respite was witnessed on the back of pledges obtained in the Climate conference in Geneva, as Pakistan succeeded in soliciting commitments of over US$10 billion from the friendly nations and multilateral donors.

Volume leaders of the week were: PPL, WTL, PRL, CNERGY and KEL.

On the currency front, the PKR weakened further, depicting a depreciation of 0.44% with the interbank quote ending at PKR228.15/US$ on Friday.

Other major news flows during the week included: 1) foreign exchange reserves held by State Bank of Pakistan (SBP) sinking to three weeks’ worth of import cover, 2) UAE committing to lend US$1 billion and rolling over an existing US$2 billion loan, 3) Signing of deal signed with SFD to finance oil derivatives worth US$1 billion, 4) CM Punjab sending a dissolution summary of Punjab Assembly to Governor and PTI also announcing to dissolve KPK Assembly on Saturday, and 5) Finance Minister, Ishaq Dar reiterating the country’s commitment to complete the IMF program.

Sector-wise Vanaspati & Allied Industries, Close-End Mutual Fund and Miscellaneous were amongst the top performers, while Leather & Tanneries, Leasing Companies and Pharmaceuticals were amongst the worst performers.

Flow wise, major net selling was recorded by Mutual Funds (US$4.7 million). Individuals absorbed most of the selling with a net buy of US$6.5 million.

Company-wise, top performers during the week were: MTL, PSEL, LOTCHEM, JVDC, and NESTLE, while laggards included: INIL, SRVI, ABOT, NRL, and TRG.

The market is expected to remain under pressure in the near future due to the concerns regarding the country’s external position and uncertainties stemming from the political situation brewing in Pakistan.

Furthermore, the upcoming Monetary Policy Committee meeting scheduled for January 23, 2023 would remain in the limelight.

Any news regarding foreign exchange inflows, whether from the IMF or other bilateral and multilateral sources, would support the market trajectory.

Additionally, clarity on the political landscape in the country would alleviate investor concerns.

Analysts expect the market to remain range-bound until there is further clarity on the economic and political fronts. They continue to advise a cautious approach while building positions in the market.

Pakistan Stock Exchange benchmark index declines 9% in CY22

Economic and political issues badly affected Pakistan Stock Exchange (PSX) in 2022. The benchmark index, KSE-100 index, declined 9% during the year. With PKR depreciating 22% against greenback, Index was down 29% in US$ terms.

According to Pakistan’s leading brokerage house, Topline Securities, 2022 was also a turbulent year for global stock markets as US$18 trillion were wiped out in 2022 with drop of approx 20% in MSCI World Index which is worst performance since the 2008 crisis. MSCI EM fell 22%, while MSCI FM was down 29% in 2022.

According to Bloomberg data, Pakistan’s KSE-100 Index was amongst worst performing market in US$ term in 2022.

Due to macroeconomic issues, activity at PSX also remained dull. Average traded volume (ready/cash) per day at PSX was down 52% to 230 million shares/day.

Similarly, average traded value per day was down 59% to PKR7 billion/day which was lowest since 2019.

In futures market, total traded volume and value per day were also down by 33% and 56% to 94 million shares and PKR3.6 billion, respectively.

KSE-100 Index also underperformed as compared to other asset classes in 2022 including Gold (+45%), one-year US$ denominated Naya Pakistan Certificate (+36%) and greenback (+28%).

T-Bills, Money Market Fund and Property indices posted return in the range of 12% to 14% in 2022.

Initial public offering (IPO) market was also impacted due to eroding equity values as only 3 IPOs raised funds in 2022 as against 8 IPOs in 2021. The number of IPOs was also the lowest in 2019 when Pakistan saw just one IPO at PSX.

Selling by foreigners continued in 2022 with net selling of US$127 million. In last 7-years, foreign corporates have sold shares worth of US$2.5 billion at PSX.

Local Mutual Funds and Insurance Companies also trimmed their position in 2022, with Mutual Funds selling US$166 million, while Insurance Companies sold US$128 million.

Selling was absorbed by Local Individuals, Banks and Companies with net buying of US$138 million, US$117 million, and US$78 million respectively.

 

Top performing sectors and scrips of year 2022

Let me and you accept the harsh reality that 2022 was a bad year for Pakistan’s capital market. Market value (market capitalization) of companies listed at Pakistan Stock Exchange (PSX) declined 17% to RKR6.4 trillion. In US$ terms it plummeted 35% to US$28 billion. Still there are some islands of excellence.

Real Estate Investment Trust (REIT), Synthetic & Rayon, and Sugar were the top performing sectors in 2022 as their market cap increased by 12%, 6% and 5% respectively, despite bad market conditions.

Technology sector was up 2% and outperformed the market despite fall in global listed technology stocks.

As against these, Engineering, Automobile Parts, and Miscellaneous sectors remained the worst performing sectors posting decline of 45%, 41% and 34% respectively.

REIT sector that has only one listed company gained in 2022 due to stable dividend yield coupled with changes in regulations on REITs investment for banks. To recall, State Bank of Pakistan (SBP) recently allowed banks to count their investments in shares issued by REIT towards achievement of housing and construction finance targets.

Synthetic & Rayon also posted strong performance led by rally in Ibrahim Fiber Limited (IBFL).

Sugar sector performance was led by JDW Sugar Mills (JDWS) that announced buy back.

Engineering sector (mainly steel related companies) was badly impacted due to economic slowdown and subdued construction activity.

Automobile parts sector also remained amongst worst performing sectors primarily due to import restrictions, high financing rates and lackluster demand.

For its analysis, Pakistan’s leading brokerage house, Topline Securities assumed sectors with minimum market capitalization of US$100 million adjusted for new listings including Adamjee Insurance (AICL), and Telecard Limited (GEMSNL).

Lotte Chemical (LOTCHEM) doubled while Airlink was down substantially in 2022. LOTCHEM was the top performing stock of the market in 2022 where the scrip gained more than 100%. Investors were excited over potential sell off by Lotte Chemical Corporation South Korea (parent company of LOTCHEM) and subsequent public offer for minority shareholders.

LOTCEHM was followed by Faysal Bank (FABL) and Unilever Pakistan Foods (UPFL). The strong stock performance by FABL is on announcement to convert into an Islamic Bank followed by a special dividend.

Similarly, UPFL stock was up 34% as the company posted strong profitability growth of 33%YoY in 9M2022.

Systems Limited (SYS), Pakistan’s largest listed IT firm remained amongst the top performing stocks for the third consecutive year as the company continued to post strong profitability growth in spite of economic challenges.

Air Link Communication (AIRLINK) declined 54% due to low profits led by lower volumetric sales.

Gul Ahmed Textile Mills (GATM) also reported decline by 52% amid slowdown in textile exports.

Searle Company Limited (SEARLE) was down 52% due to lower profits led by falling gross margins driven by significant jump in raw material cost and company’s inability to immediately pass full impact on to consumers.

 

Pakistan Stock Exchange benchmark index closes almost flat

Economic uncertainty regarding Pakistan’s ability to make good on its debt payments kept the market under pressure during the week ended December 09, 2022. The benchmark index closed at 41,698 points, posting a decline of 1.07%WoW.

State Bank of Pakistan (SBP) confirmed the payment of US$1.08 billion of International Sukuk. This brought down foreign exchange reserves held by the SBP to US$6.7 billion on December 02, 2022.

Saudi Arabia provided a much-needed breathing space to Pakistan by announcing the rollover of US$3 billion which would help meet external sector challenges and achieve economic growth.

Participation in the market improved, though negligibly, with average traded volumes increasing to 179.7 million shares from 161.8 million shares in the earlier week.

Other major news flows during the week included: 1)  ECNEC okayed RKR333.6 billion for flood-hit projects, 2) GoP announced to borrow RKR5.52 trillion domestic debt over the next three months, 3) GoP debt rose to RKR50.152 trillion, 4) revised flood damages estimates estimated at US$46 billion, 5) tractor sales anticipated to decline 67 percent, 6) auto financing dropped for the fourth consecutive month, 7) Cement dispatches Declined by 17%YoY in November 20222 and 8) Cotton arrivals plunged 40%.

Top performing sectors were: Miscellaneous, Closed end mutual funds, and Vanaspati and Allied Industries, while the least favorite sectors were: Pharmaceuticals, Jute and Leasing.

Stock-wise, top performers were: PSEL, PGLC, MUREB, ILP, and BAHL, while laggards included: GLAXO, PIOC, CHCC, PSMC, and SEARL.

Individuals were major buyers with net buy of US$8.82 million, followed by Insurance companies with net buy of US$1.26 million. As against this, foreign investors were major sellers, with a net sell of US$6.26 million. Mutual funds continued to be a seller, with a net sell of US$3.71 million.

The market is expected to remain range-bound in the near future, clouded by liquidity concerns of the country, with foreign exchange reserves held by SBP plunging to US$6.7 billion— a less than one month import cover.

Some respite may come in the form of Saudi Arabia’s expected US$4.2 billion (US$3 billion in deposits and US$1.2 billion in deferred oil facilities), alleviating the pressures off the country’s FX reserves to some extent.

Political uncertainty and any developments regarding the 9th review by the IMF would remain in the limelight.

Equities remain under pressure in November

Pakistan Stock Exchange, in a repeat of recent performance failed to hold onto mid-month gains, November closed with a muted gain as the benchmark index gained 2.6% increase in Rupee terns and paltry 1.2% in US$ terms.

Politics remains in flux, with PTI keeping up the pressure on the ruling coalition, while the economy - and the external account position in particular - remains vulnerable.

However, these top-down concerns are balanced against ultra-cheap valuations, with the market absorbing the surprise 100bps rate hike reasonably well and foreign investors turning net buyers in oil & gas exploration after a significant gap.

Analysts believe economic outlook takes precedence over political developments, with the former paramount in determining the near-term course of the KSE-100. The pending 9th IMF review is the key deriver.

Imran Khan had an eventful November, to say the least! He survived an assassination attempt, ended his march to Islamabad, and has threatened to dissolve the Punjab and Khyber Pakhtunkhwa provincial assemblies. The overall calculus remains the same, to force early general elections but there is some change in tack, with the US no longer blamed for his ouster, and a less combative stance adopted towards the army in the run up to the appointment of the new army chief.

General Munir faces the tough task of regaining lost face for the army (in farewell speeches, his predecessor vowed the institution will be apolitical), while also focusing on preserving hard-fought security gains given the Tehreek-e-Taliban Pakistan (TTP) has recently ended its ceasefire.

The major win in November for PML-N was the issuance of a diplomatic passport to Nawaz Sharif. His eventual return to Pakistan, subject to legal relief, cannot be ruled out.

The PML-N led ruling coalition is anticipated to complete its term in the center, but there is still a significant lack of clarity on political outlook.

Sustaining the IMF program remains critical. There is greater realization that Pakistan needs stability to put economy on track.

After no change in the preceding two monetary policies, the State Bank of Pakistan (SBP) raised the policy rate by 100bps to 16%, with high inflation and external account vulnerabilities outweighing weak GDP growth.

A return to prudent policymaking possibly signals the overarching importance of sustaining the ongoing IMF program but there are challenges – no date has been set for the 9th IMF review

 The PKR appears to have been kept in check by import controls and restrictions on the movement of foreign exchange and fear of a mini-budget to impose additional taxation may yet be in play to make up for flood-related losses.

There are positives, with the SBP Governor announcing Pakistan will repay its international Sukuk ahead of its scheduled December 05, 2022 maturity, as partial offsetting funding from the AIIB has already been secured.

However, with the import cover a shallow 1.5 months, analysts believe Pakistan not only needs to sustain the IMF program, but also fast-track the promised assistance from Saudi Arabia and China (debt rollover and additional financing). Potential measures such as a higher levy on diesel may be taken as leading indicators for the government’s will in keeping the IMF program on track.       

Analysts expect equities to respond more closely to the evolution of foreign exchange reserves in the near-term, rather than noisy politics which may already be in the price. Valuations are ultra-cheap backed by more companies announcing share buybacks, most recently BAFL, and mean reversion implies significant upside through the cycle.

MSCI changes are also generally positive, with LUCK, SYS, TRG and POL added to the FM100 Index effective end-November. For our top picks, we replace EFERT with ENGRO and PSO with APL. EFERT’s theme of a high dividend yield loses a little luster in the higher interest rate environment, while ENGRO offers a good blend of both yield and growth. With tough reforms appearing unlikely for now, including on the energy side, APL’s stronger fundamentals win out over cash-strapped PSO. 

 

Pakistan Stock Exchange benchmark index posts 1.74%WoW increase

Pakistan Stock Exchange witnessed an overall volatile week as the political instability raged on, dampening investors’ confidence. Participation in the market remained lackluster, with daily trading volume averaging 240 million shares. The benchmark Index gained 716 points during the week ending November 04 2022, depicting a 1.74%WoW rise in the index.

The PKR continued to lose value against the US$, depreciating by 0.25% over the course of the period. CPI once again came in higher on Wednesday, rising to 26.56%YoY for October 2022 as spikes from the unwinding of relief from fuel tariff adjustments and rising food prices impacted. Trade deficit for October 2022 was reported at US$2.3 billion, down 42%YoY. Foreign exchange reserves held by SBP were reported at US$8.9 billion on October 28, 2022.

On the international front, US FED increased its rates by 75bps on Thursday, which pushed the oil
back, as the global commodity continued to rage upwards due to lower than expected US inventory data and reports of Chinese pullback on COVID curbs.

Other major news flows during the week were: 1) Prime Minister Shehbaz Sharif on Monday announced Rs1,800 billion relief package for farmers, 2) PM arrived in Beijing on Tuesday to meet Chinese leaders and discuss plans for the China Pakistan Economic Corridor (CPEC), 3) The country's power sector's circular debt is reportedly touching PKR2.6 trillion mark at present as against PKR2.252 trillion at the end of last financial year, 4) Former Prime Minister Imran Khan was shot in the shin on Thursday when his anti-government protest convoy came under attack in the east of the country in what his aides said was a clear assassination attempt.

Company-wise, amongst main boards, BNWM, TRG and SNGP companies were amongst the top performers. AICL, NESTLE and IGIHL were amongst the worst performers.

Flow wise, substantial net selling was recorded by Insurance companies and Mutual funds totaling US$4.63 million. Individuals absorbed most of the selling with a net buy of US$4.68 million.

Top performing sectors were: Wollen, Tobacco, OMCs, Tech & Communication and Sugar, while laggards included: Vanaspati, Food & personal care, Leasing, Investment Banks/Investment Companies and Commercial Banks.

The market is expected to remain range-bound in the near future, as pressure on the PKR continues to be a cause of concern. The long march, and the ensuing political uncertainty, is expected to keep market movement in check. Moreover, the economic slowdown in the country, an intended outcome of the SBP's contractionary policies and the adverse effects of the floods are likely to keep corporate earnings subdued going forward. Analysts advise investors to remain cautious while building new positions.

Pakistan Stock Exchange: Investors remain on sidelines

During the week ended on October 21, 2022, the focus of investors remained on the current account position, besides the upcoming FATF plenary. The benchmark index remained flat and closed at 42,213 points, up 0.6%WoW. The average volume for the index continued downward trajectory, dropping to 228 million shares down 14.4%WoW.

Major news flows during the week included: 1) Q1FY23 Current Account deficit down by 37%YoY, 2) Trade deficit shrinks by 30.2%YoY in September, 3) Gas sector circular debt bloats to Rs1.5 trillion, 4) Pakistan receives only US$88 million assistance against US$816 million flash appeal, 5) Pakistan seeks rescheduling of US$27 billion debt and vi) country’s foreign exchange reserves inches up to US$13.250 billion.

The top performing sectors were: Tobacco, Close-end Mutual funds, Synthetic & Rayon, Modarabas and Power Generation & Distribution, while the least favorite sectors were: Woolen, Textile Weaving, Sugar & Allied Industries, Oil & Gas Marketing and Automobile Parts & Accessories.

The top performing scrips in the KSE-100 were: PAKT, HGFA, PGLC, SNGP and AKBL, while laggards included: BNWM, SHEL, HCAR, NRL and SRVI.

Foreigners emerged the biggest sellers, offloading US$3.4 million followed by Banks & DFI (US$1.5 million), Mutual funds (US$1.3 million), Companies (US$0.4 million) and Other Organizations (US$0.2 million). While Individuals, Brokers and Insurance Companies were on the buying side, with a net buy of US$5.4 million, US$0.9 million and US$0.6 million respectively.

Amid the volatile local political situation, the name of the game is waiting and seeing. If the political turmoil dampens, some may view it as a bull-trigger for the market, while the potential of anarchy may keep some away. Moreover, with the outcome of the FATF plenary scheduled to be announced on Friday night, the result will boost/suppress the market.

It is likely that the country will be removed from the grey list of the global money laundering and terrorism financing watchdog, which will in turn increase the flows of foreign funding into the equity market.

The PKR continued its decline which started last week and lost 1.1%WoW owing to the speculation regarding changes in the Finance Ministry. Keeping in view the uncertainty, near-term outlook for the equity market remains hazy as both bear and bull-run triggers loom overhead.

Pakistan Stock Exchange fails to sustain 50,000 levels

During the week ended 27^th January 2017, benchmark index of Pakistan Stock Exchange managed to cross 50,000 levels. It failed to sustain the level due to due to profit taking and closed the week at 49,964 points, up 1.21%WoW. Earnings and corporate announcements remained at the center of investor interest with major highlights including: 1) CHCC announcing capacity expansion of 2.1 million tons per annum, 2) PSMC’s plan to enter in to a JV to manufacture automobile glass and 3) ISL disclosing plans to enhance capacity. Volumes improved considerably during the week with daily average rising to 523.4 million shares, up 34.7%WoW with foreign outflows also tapering to US$13.7 million as compared to US$46.6 million a week ago. Top gainers were: EPCL, KEL, HUBC and BAFL, while laggards were: ASTL, SSGC, NCL and MTL.

Major news flows for the week were: 1) SECP constituted a committee to review matters of in‐house financing, 2) the ECC extended cash subsidy on domestic fertilizer sales and approved 0.3 million tons of urea till 28^th April, 3) CCP imposed fines of Rs62.3 million on EFOODS, Rs2 million on FFL and Rs0.5 million on Shakarganj Foods for deceptive marketing of dairy products as milk with EFOODS denying these allegations later, 4) FBR exempted sales tax on machinery imports by textile units and customs duty on import of 13 items for textiles till 30^th June 2018, 5) SBP raised Rs39.39 billion through PIB auction and 6) GoP signed implementation and power‐purchase agreements with two Chinese companies and HUBCO for setting up 1320MW coal plant at Hub and 330MW coal plant in Thar. With no excitement expected in the monetary policy review over the weekend, the market is likely to retain its focus on results announcements with major names in Sugar, Fertilizer, Foods and Autos reporting earnings. January CPI data due next week can prove a key in setting expectations for future interest rate trajectory. On the global front, the US FOMC is also scheduled to announce its interest rate policy, with broader anticipations of no change in the Fed rate.

Fauji Fertilizer Bin Qasim (FFBL) is scheduled to announce its full year financial results for CY16 on Monday 30^th January. The companies is forecast to post profit after tax of Rs678 million (EPS: Rs0.73) in CY16F as compared to net profit of Rs4.06 billion (EPS: Rs4.35) in CY15, down 83%YoY). This decline in earnings is expected on the back of: 1) gross margin (GM) coming off by 15.7% (including subsidy) on account of significant reduction in DAP prices (down 14%YoY) due to depressed international price trends, 2) a 39%YoY lower other income (excluding subsidy) on account of lower dividend payout from associated companies and reduction in term deposit placements, and 3) 19%YoY higher finance cost owing to increased borrowing to manage working capital requirements. Sequentially, analysts expect earnings to post a turnaround recording profit of Rs1.73 billion (EPS: R1.15) in 4QCY16 against net loss of Rs159 million (LPS: Rs0.17) in 3QCY16 on the back of 1.3xQoQ growth in topline to PkR23.7bn on account of increase in DAP offtake to 483,000 tons, courtesy the Rabi season. Along with the result we also expect a cash dividend of Rs0.60/ share. While earnings turnaround in 4QCY16 is expected to be led by strong volumetric growth, we feel an improvement in international pricing dynamics would be necessary for sustainability of the earnings trend, going forward.

Lucky Cement (LUCK) announced its 2QFY17 result posting consolidated/unconsolidated earnings of R4.34 billion/ Rss3.80 billion (EPS: Rs13.43/Rs11.75) in 2QFY17, up 16%YoY/12%YoY. The consolidated earnings came in line with the expectation of Rs4.27 billion (EPS: Rs13.21) where unconsolidated earnings of AKD Securities higher than our expectation owing to better than expected GM during the period. This was in spite of 68%YoY/30%QoQ surge in average coal price to US$85/ton suggesting LUCK utilized cheaper coal inventory during the period. On a cumulative basis, consolidated/unconsolidated earnings grew by 13%YoY/13%YoY to in 1HFY17. Growth in earnings was led by 1) Topline grew by 12%YoY/22%QoQ led by 16%YoY/19%QoQ growth in dispatches to 2.03 million tons in 2QFY17 as compared to 1.753 million tons/1.703 million tons in 2QFY16/1QFY17, (2) Gross Profit increased by 16%YoY/18%QoQ led by improved topline and 1.61ppt YoY GM expansion to 49.05% in 2QFY17, and (3) Other income growth  by 64%YoY/10%QoQ to Rs498 million in 2QFY17 owing to relatively higher cash and STI of Rs32.1 billion (Rs99.28/share).