During the week ended 18th October, Pakistan
Stock Exchange remained under pressure due to external and internal pressures.
While India continued medium and heavy artillery shelling across the line of
control (LoC), Panama case hearing added more confusion rather than providing clarity.
As a result the benchmark Index closed 1.2%WoW lower at 42,325 points. Daily average
trading volumes also declined 7.1%WoW to 458.6 million shares. Top gainers for the
week included: HASCOL, EPCL, PIOC, CHCC and NCL; while losers were: INDU, ICI,
ASTL, SSGC and DAWH.
Major news flow for the week included: 1) GoP rejected
bids worth Rs113 billion (against a target of Rs50 billion) for this month’s auction
of Pakistan Investment Bonds (PIB) as banks sought higher interest rates, 2)
SBP reduced SLR for Islamic banks and banking branches by to 14% to induce
liquidity near Rs225 billion Bai‐Muajjal maturity, 3)
Vitol announced plans to acquire another 10% stake in HASCOL exercising its
call option that would take cumulative holding to 25 percent, 4) Oman Telecommunications’
Chief reiterated plans to sell the company’s controlling stake in WorldCall
Telecom, 5) Lucky Electric Power Company revised proposal for its planned 660MW
power plant following a shift in fuel source to local coal with the EPC arrangement
expected to be finalized by before 2016 and 6) SECMC expects to begin
commercial operations for its 660MW Thar coal‐fired
power project by June’19.
With room for escalation in political tensions on developments
on Panama case, delayed till 29th November, market is likely to
remain lackluster. Moreover, futures rollover next week along with possible
continuation of foreign outflows is likely to keep market under pressure.
Anticipations regarding this month’s monetary policy statement are expected to
remain in favor of a status quo, giving support to banking scrips. Continued
weakness in coal prices (a decline by almost 18%WoW) can propel price
performance in the cement sector while volatility in crude prices ahead of OPEC
meeting scheduled on 30th November may prompt higher activity in
energy stocks.
According to AKD Securities, 9MCY16 earnings performance of
Bank Alfalah (BAFL) was laudable on a number of counts, especially in terms of
improvement in asset quality and effective Current Account mobilization.
Flagging NPL ratio of 5.4% ‐ the lowest among ‘Big-Six),
the bank's provisioning charges have come down by a sizable 79%YoY to Rs267 million,
while coverage has increased to 83.1% in 9MCY16. Gaining confidence from the
same, the brokerage house is now more comfortable on the bank's asset quality
metrics and has lowered its provision charges. In turn, the bank's CASA hiked
to 79% as compared the same period last year, lowering cost of funds. The
brokerage house believes there are chances for further trimming, where apart from
the aforementioned factors, CAR enhancement to 14.1% and ADR in excess of 50%
depicting bank's push for loan growth are additional positives.
Lack of encouraging news flows, following a shift in
policy for coal fired power plant (refusal to allow imported coal projects),
lack of headway on circular debt clearance and privatizations have weighted on
the energy sector companies, with HUBC and KAPCO posting a decline of about 12
and 13 percent FYTD. The impact on future growth projects (limiting of size and
scale of planned expansions) from an adverse policy environment may be
sizeable, holding down valuations and profitability in the long run.
According to the monthly automobile sales and production
data, total vehicles sold reached 16,330 units (down 1.5%MoM and 17.2%YoY)
during October this year. The sale comprised of 14,796 passenger cars
(increasing 1.2%MoM but down 5.8%YoY) and 1,534 LCVs (falling 22.2%MoM and
61.8%YoY). The halving of GST on tractors allowed sales to climb by
46.3%MoM/93.2%YoY to 4,642 units. Monthly numbers point to a systemic
consolidation in unit sales as consumers adjust buying behavior to accommodate
for new models, while OEMs phase out models (Hilux by INDU and possibly Cultus
by PSMC). Buying behavior is expected to ramp‐up
in the beginning of CY17 with newly registered automobiles experiencing an
increase in demand, additionally, auto sales growth is expected to normalize in
2QFY17, where the high base of the Rozgar scheme sales normalizes.
