Inching towards another milestone of 48,000 level, benchmark
of Index of Pakistan Stock Exchange (PSX) closed the week ended on 30th
December 2016 at an all‐time high of 47,807, up 2.52%WoW.
Activity at the bourse tapered 15.06%WoW with average daily volume at 286
million shares. The volume leaders were DSL, BOP, KEL, DCL and TRG.
Key news flows during the week included: 1) Ogra
recommended increase in POL prices, 2) CNG prices increased across Sindh, the
first hike following the GoP’s decision to deregulate the country’s CNG market,
3) GoP rejected all the bids in PIB auction, 4) ECC of the cabinet approved
export of 225,000 tons of sugar without any rebate and allocation of 26MMCFD
gas to EFERT old plant and 5) Lahore High Court nullified the auction of DTH license
carried out by PEMRA after striking down the rules and regulations which barred
broadcasters from applying/participating in the bidding process.
Performance leaders during the week were: EFOODS, HCAR,
FCCL, SHEL and SNGP; while laggards included: HMB, AICL, PSMC, POL and PTC.
Foreign participation continued its negative trend with US$17.9 million outflows
compared to US$45.5 million in the last week.
After a phenomenal end to the calendar year, PSX posted
remarkable return of 45.7% in CY16, outperforming the world equity markets. The
market is likely to continue its positive trend in the near term in the
absence of any negative trigger. However, room for volatility in the next week
remains where risk could emerge in the form of: 1) international oil price
swings on potential concerns on the rising US inventories and 2) resumption of
Panama leak case proceedings.
Following its previous month performance, fertilizer offtake
remained promising during November'16 as well on the arrival of Rabi season
coupled with continued support from subsidy package announced in FY17 budget.
After declining significantly during 5MCY16 (down 32%YoY), fertilizer offtake rose
28%YoY during June‐November 2016. According to latest
figures released by NFDC for November'16, total fertilizer sales increased to
1.58 million tons against 1.32 million tons sold in November'15, up 20%YoY/68%MoM).
Urea sales increased to 764,000 tons during November'16, up 23%YoY. On a
cumulative basis, total fertilizer sales posted a growth of 3%YoY to 7.83 million
tons during 11MCY16, whereas urea offtake was 4.59 million tons (down 4%YoY).
On arrival of Rabi season, DAP sales continue to show great strength in November'16,
registering an increase of 17%YoY/32%MoM to 631,000 tons, of which imported DAP
sale was 421,000 tons (up 10%YoY/61%MoM). Near‐term
factors affecting fertilizer industry are: 1) Rabi season to continue driving
demand, 2) favorable ruling from SHC against GIDC imposition, 3) international
pricing dynamics (urea prices rebounded to US$235/ton in December’16 and 4)
decision on export of excess urea inventory.
Latest banking sector data for November'16 indicates that
banks' balance sheet (BS) continues to grow at strong levels by 9%YoY to Rs12.3
trillion. With banks lowering their preference for risk‐
free GoP securities (investments down 9% since June'16, private sector credit
growth picked up pace, posting an encouraging growth of 11.7%YoY during
November’16. Consumer financing grew by a healthy 20.%YoY (10.3% of the private
sector loans) as banks look to re‐focus on high margin
auto finance and personal loans in the current lower inflationary environment.
Expecting spreads to bottom out this year as interest rates rise next year,
analysts retain their liking for banks due to: 1) the room to benefit from loan
growth, 2) an adequate CAR buffer, 3) achieved economies of scale and 4) a
strong non‐interest
income franchise. Playing this theme, we like HBL and UBL however, post price‐bull
run over the last 6 months.
According to provisional data, cement dispatches during
December'16 declined by 0.8%YoY/8.9%MoM to 3.414 million tons. Weaker domestic
demand growth during December'16 could be attributed to seasonal slowdown in
construction activity and decline in PSDP expenditures in December'16. Exports
also declined, likely due to the seasonality factor. While industry's
dispatches growth remained dismal, CHCC dispatches were up to 119,000 tons in
December'16, indicating the commencement of its 1.32 million tpa Brownfield
expansion during the month. On a cumulative basis, industry's dispatches grew
by 7.9%YoY in 6MFY17 as compared to 9.9% in 5MFY17 due to recent month's
decline in dispatches. Seasonal slowdown in winters may keep dispatches growth
rate lower, where we expect domestic demand growth to pick up ahead of summers
as construction activity and PSDP releases increase.
