Pakistan Stock Exchange Index posts 1.4%%WoW decline

Pakistan Stock Exchange posted lackluster performance during the week ended on June 16, 2023, with KSE-100 index losing 603 points during the week to close at 41,301 points, posting a decline of 1.4%%WoW. 

Market participation also registered a decline of 25%WoW, averaging at 161.7 million shares as compared to an average of 215.7 million shares a week ago. Despite the negative impact of the budget, including the imposition of a 10% super tax, windfall tax, and tax on bonus share, the market showed some resilience.

Meanwhile, in the last Monetary Policy Committee (MPC) meeting on Monday, State Bank of Pakistan maintained the policy rate at 21%.

As per news flow, GoP has paid US$1.0 billion as debt repayment during the week. The SBP in its post MPS briefing apprised that only US$800 million of repayment was due for the remaining month. The decline in reserves resulting from this repayment is expected to be visible in the foreign exchange numbers to be released next week. As of June 9th, foreign exchange reserves held by SBP were reported at US$4.02 billion, which are anticipated to drop below the US$3 billion mark due to the rumored debt repayment.

On the currency front, PKR lost 0.09%WoW to close at PKR287.2/US$.

Other major news flows during the week included: 1) LSM took a nosedive of 21.07% in April, 2) US$7 billion Chinese and Saudi deposits and PKR402 billion paid as cost of rollovers, 3) July-May remittances plunged 13% to US$24.83 billion, 4) Car sales took a nosedive of 80% in May, 5) Tax expenditures constitute 36.43% of FBR tax collection, 6) IMF came down hard on Pakistan’s budget proposals.

Sector-wise, Leasing Companies, Chemical, and Textile Weaving were amongst the top performers, while Transport, Modarabas, and Textile Spinning were amongst the worst performers.

Flow wise, major net selling was recorded by Mutual funds with a net sell of US$1.97 million. Individuals absorbed most of the selling with a net buy of US$4.40 million.

Top performing scrips during the week were: PGLC, SHEL, COLG, MTL, and BNWM, while top laggards included SML, KEL, HINOON, PSMC, and FABL.

Market is expected to remain range bound in the short term, primarily due to the lack of clarity on the IMF front as the current IMF program is nearing expiration with less than half a month remaining.

Additionally, political instability will also contribute to investors’ uneasiness and impact the market confidence. It is advisable for investors to remain cautious while building positions until stability improves.

Analysts continue to advocate stocks with dollar denominated revenue streams i.e. E&P and Technology sector. Additionally, considering companies with healthy forward dividend yields can be a strategy to explore.

Pakistan Stock Exchange benchmark index closes flat

The uncertainty stemming from the appointment of the next Chief of Army Staff kept Pakistan Stock Exchange under pressure during the week ended on November 25, 2022. The benchmark index ended the week at 42,937, posting 0.48%WoW gain.

Participation in the market remained lackluster, with daily average trading volume at 159.58 million shares, as compared to 186.3 million shares traded in the earlier week.

All eyes had been on the Monetary Policy announcement scheduled for Friday; the State Bank of Pakistan (SBP) decided to increase the policy rate 100bps to 16%.

Other major news flows during the week were: 1) Pakistan’s foreign exchange reserves declined by
US$134 million to US$7.8 billion, 2) fertilizer offtakes plunged by 50.3%YoY in October, 2022, 3) revenue collection target for December 2022 set at PKR 965 billion, 4) FDI dropped 52% to US$348 million during first four months of current financial year, 5) World Bank approved soft loan of US$200 million for Pakistan for green project, 6) Credit default swap shoots up to 92.53% on political unrest and 7) SBP failed in setting up US$400 million oil fund.

The top performing sectors were: Jute, Technology & Communication and Transport, while the least favorite sectors were: Power generation & distribution, Vanaspati & Allied Industries and Cable & Electrical.

Stock-wise, top performers were: INDU, SYS, ENGRO, DAWH and PSEL, while laggards included: HUBC, MUREB, FCEPL, FATIMA and KEL.

Flow wise, Individuals were major buyers with net buy of US$4.8 million, followed by Foreign Investors (US$1.1 million), while Mutual Funds were major sellers during the week, with a net sell of US$2.8 million. Insurance continued to be a seller, with a net sell of US$1.4 million during the week.

The market is expected to remain range-bound in the near future. The 100bps increase in policy rate announced on Friday does not bode well and likely to dampen the outlook for equity markets.

Furthermore, the upcoming maturity of the International
Sukuk of US$1 billion will be in focus, with a positive outcome possibly restoring sentiment regarding Pakistan's external position that would follow the same.

Any development regarding the 9th review by the IMF would remain in the limelight. The market could come under further pressure due to political uncertainty from the continuing long march slated to reach Rawalpindi by November 26, 2022.

Analysts advise clients to stay cautious while building new positions in the market.

Pakistan Stock Exchange Benchmark Index Inching Towards 52,000 Level

Pakistan Stock market continued its rally ahead of the MSCI EM inclusion announcement with the benchmark index closing at the all‐time high level of 51,751points (gaining 3.81% WoW) for the week ended 12^th May 2017. Investors’ participation improved, evident from average daily trading volumes for the week increasing by 34.6%WoW to over 355 million shares. Major news flows during the week included: 1) the Federal Cabinet approved the Budget Strategy Paper for FY18 targeting 6% GDP growth along with plan to bring down fiscal deficit to 4% of GDP by FY20, believing that PML-N rule may continue post 2018 election, 2) Board of Directors of Pakistan Stock Exchange (PMX) approved the sale of remaining 20% shares of the exchange to the general public through IPO with floor price of Rs28/share, 3) trade deficit widened 40.12%YoY to US$26.5bn in 10MFY17 while remittances declined 2.79%YoY to US$15.596 billion in the same period, 4) budget deficit escalated to 3.7% of GDP in 9MFY17 (3.4% in 9MFY16) indicating that GoP will miss its 3.8% target for the current financial year and 5) cement dispatches during April’17 grew by 1.7%YoY to 3.57 million tons with cumulative 10MFY17 dispatches rising to 33.88 million tons. Major gainers during the week were: AICL, MCB, PPL, POL and NML; while losers were: LOTCHEM, HASCOL, AGTL, HCAR and MEBL. Foreign selling eased slightly with net outflows of US$2.46 million compared to US$19.27 million a week ago. Analysts maintain a positive outlook on market’s performance with Pakistan’s formal graduation to the EM space in the MSCI Semi‐Annual Review to be announced on 15^th of this month. In this backdrop, analysts favor (OGDC, HBL, UBL, MCB, LUCK, PSO, HUBC, ENGRO and NML). Moreover, incoming proposals for the upcoming Budget FY18 are likely to keep investors’ interest robust.

Declining oil prices eroded the global commodity index by 2.1%MoM during April'17. Oil prices declined due to the high stockpiles and abundant supplies despite the OPEC's cut in place. Following on, similar price trend was seen across major commodities with Steel (down 15%MoM on declining Chinese exports amid surging inventory levels), Urea (down 9%MoM on continuous capacity additions) and FAO Dairy index (down 3.3%MoM on account of peaking seasonal production) losing out the most. Cotton prices remained flat on strong demand from cotton importing countries, currently standing at their 3yr high. Going into May'17, oil producers meeting regarding extension of the agreed supply cut holds significant importance with implications spilling on to overall commodity price trend.

The significant rise in current account deficit (2% of GDP in 9MFY17 vs. 0.83% in comparable period) has emerged as a serious concern for the external account. This downward spiral is expected to continue in remainder of the fiscal year, with CAD expected to reach 2.7% of GDP‐ highest since FY09. This revision in CAD estimates is driven by: 1) worsening trade balance (projected decline of 34%YoY in FY17F) and 2) falling remittances (‐1.3%YoY in FY17). In addition, respite from this trend seems unlikely with CAD projected to further widen to 3.8% of GDP in FY18 in line with a growing trade deficit (19.7%YoY in FY18) due to higher petroleum and development‐related imports. This in turn remains a key concern for foreign exchange reserves which are projected to end FY17/FY18 at US$21 billion/US$17.5 billion as compared to US$23.1 billion in FY16), opening room for currency depreciation.

In line with ENGRO's diversification􀆟on strategy to realign towards relatively higher yielding energy vertical, the company through its subsidiary Kolachi Portgen (Pvt) Ltd ‐ KPL (100% stake) has recently filed a tariff petition with NEPRA for approval of US$392.3 million, 450MW (441.77MW net capacity) RLNG based Power Plant at Port Qasim, Karachi. Expected to commence commercial operations by the end of CY19 (27 months construction period from financial close), the project is expected to deliver IRR of 23.5% by transmitting 100% net capacity to KEL under a power purchase agreement (Letter of inter‐LOI issued by KEL) at an expected levelized tariff (at base case ‐ RLNG without compressor) of Rs7.09/KwH for a period of 30-years at 92% load factor.

Pakistan stock market performance in April 2017 and outlook

Pakistan stock market suffered from two contentious issues, political uncertainty and SECP probe of the erring brokers. The market posted 2.2%MoM paltry gains. While Supreme court judgment fell short of disqualifying the prime minister, investigations against certain brokers, dented investors’ confidence.

While AKD Securities termed investors’ participation healthy with daily trading volume for the month averaging at 240 million shares, activity remaining concentrated in mid-tier stocks. The volume leaders emerged: ASL, TRG and EPCL. In terms of price performance at the main board, Automobiles and Parts were clearly ahead gaining 21.8%MoM on above expected financial results coupled with new model launches, while trailing far behind were Oil & Gas, Cements and Textiles.

The triggers included formal MSCI EM inclusion in May'17 and expectations of populist budgetary measures; any further regulatory tightening by SECP continues to hang in the balance. The brokerage house continues to advocate scrips potentially making it to MSCI EM index (OGDC, HBL, UBL, MCB, LUCK, PSO, HUBC, ENGRO and NML) while also favoring Auto names like INDU and PSMC. However, foreigners continued to sell (April'17 net outflow of US$36.3 million) taking CYTD outflows to US$198.7 million. Going into May'17, AKD Securities expects formal MSCI EM inclusion and anticipated populist budgetary measures to catalyze performance. However, further regulatory tightening along with political noise are key concerns.

Pakistan Stock Exchange posts 29 percent increase in daily traded volume

Having recovered 4.5% in the prior week, benchmark of Pakistan Stock Exchange went back into the red zone during the week ended 28^th April 2017 closing at 49,301. Analysts attribute this fall to new disclosure requirements by SECP, and continued political uncertainty with futures rollover week further aggravating the decline. Average daily traded volumes increased by more than 29%WoW to 359 million shares with volume leaders being EPCL, ASL, ANL, SMBL and TRG. Key news flows during the week included: 1) PSMC unveiling the 1,000cc Celerio (re-branded as the new Cultus) at a ceremony held in Lahore, 2) PPL announcing discovery of 29.2mmscfd gas from its Gambat South block (65% working interest), 3) announcement of Punjab Orange Cab scheme for the unemployed youth by CM Punjab, with expected scheme size of 100,000 units, 4) GoP raising Rs360 billion through auction of short‐term government papers and 5) GoP notifying a relaxation of the moratorium on new gas connections for industrial, commercial and captive power plants directing the gas utilities to implement it with immediate effect. Gainers of the week were AGTL, PSMC, INDU, ASTL and HCAR; while laggards included PPL, EFERT, NCL, NML and CHCC. Foreign participation continued its negative trend with US$10.71 million outflows compared to US$31.97 million in the prior week. With the result season nearing its end, analysts expect the market to remain range-bound amid lack of triggers.

Contrary to February, country's total exports during March'17 rebounded 9.9% MoM/3.4%YoY to US$1.8 billion, where textile exports (60% of total exports) posted marked recovery to clock in at US$1.064 billion up 7%MoM. The upswing in the textile exports in March'17 was primarily driven by 9.9%YoY growth in value added exports to US$775 million, while non‐value added exports declined to US$289 million down 2.5%YoY. On a cumulative basis, 9MFY17 textile exports were still 0.77%YoY lower at US$9.29 billion, largely contributed by 8.5%YoY decline in the low value segment diluting the impact of 2.5%YoY growth in the value added segment. Looking ahead, textile exports are likely to remain under pressure due to: 1) demand side bottlenecks emanating from depressed Chinese demand and slowdown in EU, post Brexit, 2) liquidity crunch faced by textile sector due to delay in tax and rebate refunds amounting to Rs300 billion and 3) continuous upward trend in international and local cotton prices, raising cost of doing business. Having said that, recent appreciation in regional currencies as compared to slight depreciation in the PkR/US$ coupled with Rs180 billion export package, may extend some support to the declining exports, going forward.

Fauji Fertilizer Company (FFC) posted unconsolidated profit after tax of Rs2.19 billion (EPS: Rs1.72) for1QCY17 as compared to net profit of Rs2.73 billion (EPS: Rs2.14) for 1QCY16, down 20%YoY. Earnings came in slightly above market expectation due to 5.4% higher than expected topline on the back of greater than anticipated offtake growth. Key highlights of 1QCY17 earnings includes:  1) a 4%YoY decrease in topline to Rs11.19 billion reflecting 4%YoY expected slowdown in Urea offtake coupled with low urea prices and 2) improvement in gross margin to 31.5% (including subsidy) during 1QCY17 due to low feed gas prices (down 39%YoY) restricting earning decline. Along with results, the company also announced an interim cash dividend of Rs1.50/share.

Indus Motor Company (INDU) reported robust earnings for the 3QFY17 amounting to Rs4.17 billion (EPS: Rs53.05) higher by 41%YoY, beating out estimates and recording its highest earning quarter ever. Stellar earnings were the outcome of: 1) topline growth of 16%YoY, where the deviation may have occurred from higher CBU sales, 2) improved margins of 19.2%, signifying improved margins for the facelift Revo and Fortuner variants and 3) effective tax rate of 30% 1QFY17. On the flip side, finance costs rose 899%YoY due to the late payment on deliveries and below the line expenses increase tapering the bottom-line. Net profit for 9MFY17 rose to Rs10.24 billion (EPS: Rs130.34) up 16%YoY, with total payouts over the period at Rs80/share. Thus the company has a higher payout ratio that added to the planned CAPEX of Rs3.5 billion for FY17, points to improved liquidity at the OEM.

Pakistan Stock Market witnesses over 37 percent decline in daily traded volume

Trading at Pakistan Stock Exchange (PSX) remained lackluster for the large part of the week. During the week ended 7^th Aptil’17, the benchmark index closed at 48,156 points with average daily turnover during the week falling 37.36% WoW to 155.75 million shares. Volume leaders during the week were:  ASL ANL, BOP, BYCO and TRG. Key news flows during the week were: 1) headline inflation for March’17 rising to 4.94%YoY, 2) GoP raising petroleum prices, 3) INDU unveiled investment plan of Rs3 billion for debottlenecking of its paint shop, 4) IMF concluded its consultation with GoP, opining cautious stance on fiscal and external account while maintaining 5% GDP growth target, 5) Commerce Minister hinting disbursal of the first installment under the Rs180 billion textile package shortly and 6) SSGC approved  Rs64.9 billion additional gas pipeline development project to transfer 1.2bcfd RLNG from Bin Qasim to Sawan  with expected COD October’18. Stocks leading the bourse were: SSGC, INDU, MEBL, LUCK, and HCAR, while laggards were: NBP, NCL, AICL, ENGRO and SNGP. Foreign interest was positive during the week with net inflow of US$9.25 million compared to US$19.04 million net outflow a week ago. With high political uncertainty and delayed in implementation of in‐house financing product, market is expected to remain under pressure. However, commencement of results season may lend some support to the market. On the global front, recent U.S missile attack at Syria escalated tensions in the Middle East can that is likely to push crude oil prices higher, which can lend support to market.

The IMF recently concluded its Article IV staff‐level discussions with Pakistan, adopting a cautious tone on the country's ability to sustain recent macroeconomic gains. While similar to earlier reviews lagging fiscal and reform implementation efforts were counted as potential disruptive factors, looming external account threats also became a highlight. In this regard, the Fund has sharply increased its FY17 current account deficit projection to 2.9% of GDP (1.2% of GDP in FY16) on weak trade dynamics. On the fiscal front, GoP is expected to miss its deficit target of 3.8% of GDP with IMF forecasting the same at 4.1% owing to slow revenue collection (Rs2.2 trillion in 9MFY17 against Rs3.6 trillion target for FY17). Urging fiscal consolidation and greater tax collection, the Fund has also highlighted lack of progress on structural reforms in the energy sector. On a positive side, GDP growth for FY17 is expected to rise to 5.0% as compared to 4.7% for FY16 on CPEC led investment. IMF has appreciated controlled inflation levels, though advising a prudent monetary stance keeping in view fiscal and external risks.

Due to high political uncertainty, Pakistan market witnessed 0.8% MoM erosion during March'17, trimming down its CYTD return to a mere 0.7%. While foreign selling continued unabated during the month (FIPI outflow of US$22.8 million in March'17), participation of local players also remained lean, with volumes coming down by 31%MoM. Buying activity of Mutual Funds came down to around US$19.1 million as compared to US$47.9 million and US$44.1 million in February'17 and January'17). Banks and Individuals sold US$16.1 million and US$35.1 million worth of equities respectively. Barring Textiles, all main-board sectors posted negative returns with the highest decline seen in Cements and the index heavyweights Oil and Gas and Commercial Banks. Going into April'17 is likely to hold key importance in determining the market's direction. In addition, other points of significance include: 1) foreign flow trend a month prior to inclusion in MSCI EM index next month, 2) commencement of results season, 3) preliminary budgetary news flow and 4) inflation number this month to set the tone for interest rate hike during the year. 

Upsides in HASCOL are due to superior volumetric growth (CY17‐21 CAGR of 9.7%)  outpacing the industry, with requisite CAPEX dovetailing an aggressive retail push (adding 16 pumps per quarter for CY16) and storage infrastructure (planned addition of 350,000MT operational by 1QCY18). In this backdrop, AKD Securities has raise its CY17‐19 earnings by 11%, on the back of revised volumetric growth and increasing long term CPI assumption to 4%. However, with ambitious growth targets, the risks from a volatile oil price environment and associated inventory losses are hard to rule out. Ramping up of supply is also expected to strain liquidity while a commensurate increase in below the line expenses may drag profitability. Compared to listed peers, HASCOL’s books have better liquidity with room available to handle planned CAPEX. At current levels, the market seems to be under pricing growth.

Pakistan Stock Market Comes Under Extensive Pressure

After starting the week on a shaky foot, market remained volatile as investors preferred realizing profits due to uncertainty around Panama hearing, law and order concerns and stories about unethical conduct of some of the brokers. During the week ended on 24th February, the benchmark index of Pakistan Stock Exchange (PSX) closed almost flat at 49,008 levels. Average daily trading volume at the bourse tapered to 322 million shares, down by 11.6%WoW. Foreign flows also declined with net outflows for the week rising to US$4.8 million as compared to inflow of US$4.2 million a week ago. Major news flows during the week included: 1) current account deficit for January’17 rose by 16%YoY to US$1.19 billion taking 7MFY17 cumulative deficit to US$4.71 billion, up 90%YoY, 2) GoP raised Rs59.7 billion through PIB auction with banks’ biding for Rs115.2 billion but cut off yields remained largely flat, 3) National Assembly Standing Committee was informed that the GoP is considering a subsidy package for farmers in the FY18 Budget, 4) Chairman of the PSX’s Divestment Committee stated that the exchange would be listed through an IPO by the end of June this year, 5) PSMC announced expansion plans for producing 100,000 units, with total planned outlay of US$460 million and 6) KPMG Taseer Hadi – Independent Consultants for SNGPL and SSGC – released their report suggesting UFG benchmarks for the utilities at 5%. Top performers at the bourse were: HMB, MTL, PIOC and SSGC, whereas laggards included: HASCOL, DAWH, AGTL, and ASTL. As the result season approaches its end, the market is likely to retain focus on developments around Panama‐gate case. Uncertainty around the time frame for the announcement of the decision can keep investors on edge, inducing greater volatility in the market. Additionally, February’17 CPI inflation to be announced next week is expected to be higher than last month and will help to firm expectations of a higher interest rate trajectory going forward.

External trade trend witnessed improvement during January'17 with exports rising to US$1.78 billion (up 3.0%MoM/0.7%YoY), marking reversal from the consistent monthly downward trend seen this year. Textile sector, which constitutes more than 60% of country's exports picked some pace and rose by 2.7%MoM to US$1.06 billion during the period under review driven by broad‐based recovery in both low value (+7.8%MoM) and value‐added segments (+1.0%MoM). However, on a cumulative basis, 7MFY17 textile exports are still 1.5%YoY lower as compared to that of US$7.23 billion for the corresponding period last year. Going forward, analyst at AKD Securities expects textile exports to largely remain under pressure due to: 1) demand side bottlenecks with weak Chinese demand outlook and concerns of an economic slowdown in the EU following Brexit and 2) lower currency competitiveness amid sharp depreciation in regional currencies against US$. That said, the recently announced export incentive package worth Rs180 billion with the textile sector having the lion's share is expected to enhance export competitiveness over regional countries remains a key near‐term trigger for the sector. Moreover, encouraging cotton arrivals to date (up 10.63%YoY) to 10.634 million bales) is expected to reduce cotton shortfall this year.

Large Scale Manufacturing (LSM) during 1HFY17 grew by 3.90%YoY buoyed by a jump in December'16 by 7.04%YoY on seasonal trends. However, this remained slightly lower as compared to 1HFY16 owing to slower than earlier growth in the Auto sector. However, recovery in the Food sector lent support to the LSM index. While some upwards push is expected in the coming months on periodical trends, analyst expects the trend to normalize over FY17. However, ongoing expansion plans can lift the index higher than previous year. This remains inadequate for achieving FY17 GDP target of 5.7%.

Pressures on rupee seems more imminent due to 7.3%MoM increase in trade deficit emanating from a 6%MoM decline in remittance inflows during January’17. Consequently, analysts expect sharper deterioration with CAD rounding off at 1.85% of GDP in FY17 on rising trade deficit and declining remittance. This adds to already worsening foreign exchange reserve position as foreign debt flows (net of repayments) in 7MFY17 at US1 billion have been lower than US$1.3 billion in the corresponding period. Resultantly, import cover on SBP held reserves now stands at 4.6 month compared to 5.4 month at end FY16.

Pakistan Stock Exchange witnesses 28 percent decline in trading volume

Pakistan Stock Exchange (PSX) continued its bearish momentum during the week ended 28th October 2016. The sentiments were driven by rising political uncertainty over 2nd November PTI protest and lower international oil prices. The benchmark Index slipped below 40,000 mark and close at 39,873, down by 3.44%WoW. The average daily trading volumes for the week declined to 341.2 million shares, down by 27.7%WoW.

The key news flow during the week included: 1) China's Baosteel Group expressed its interest in acquiring PSM, 2) GoP expressed intentions to disallow dedicated gas supply from new discoveries to 4 fertilizer plants, including EFERT during the upcoming winter season, 3) Sindh High Court allowed benefit of SRO 1125/2011 to spinning mills at the rate of zero percent on the import of raw cotton, 4) GoP raised Rs90.2 billion though Treasury Bills auction, where cut off yield for the 3-months were raised while yields on 6 and 12 month Bills remained stable and 5) IMF Chief Christine Lagarde during her visit praised Pakistan for emerging from an economic crisis to a stabilizing economy.

Volume leaders for the week were BOP, KEL, TRG, PACE and PIAA. While gainers were: MLCF, FCCL, PIOC and ICI, laggards included: SHEL, ASTL, LOTCHEM and PSMC. Foreigners emerged net buyers with net inflow amounting to US$14.1 million as compared to net outflow of US$8.46 million a week ago. With result season nearing its end, analysts expect market sentiments to be driven by political developments ahead of PTI protest. Furthermore, escalation in cross border tension and domestic security concerns can add further pressure. However, textile sector may come into limelight upon expected announcement of the export package worth Rs75 billion by the GoP. On the global front, OPEC countries are scheduled to meet in November to discuss details over output freeze/cut. The outcome can impact oil prices and performance of companies listed at PSX accordingly.

Recent developments with regards to upgraded fuel quality, volumetric sales dynamics and long term competitive dynamics were discussed at PSO's 1QFY17 analyst briefing session. To recall, the OMC posted earnings of Rs4.38 billion (EPS: Rs16.11) for the quarter, where growth of 35%YoY was led by inventory gains of Rs1.0 billion (R3.68/share) as compared to a small loss in the comparable period last year. Overall, PSO: 1) lost market share (56.5% currently) due to losing out on white oil segment growth, 2) benefitied from higher margins (HSD and Mogas), lower Mogas cost of supply, 3) provisioning for receivables from PIA of Rs300 million (on gross receivable of Rs15 billion) and, 4) absence of late payment income from IPPs where power sector receivables of Rs162 billion remain unresolved. Having the footprint PSO does, it cannot take part in inventory curtailment or limit supply, but has to follow a strict system of procurement.

FATIMA has posted unconsolidated profit after tax of Rs3.9 billion (EPS: Rs1.62) for 3QCY16 as compared to net profit of Rs612 million (EPS: Rs0.29) for 3QCY15. Key highlight of the result includes: 1) strong growth in topline to Rs10.13 billion caused by increase in Urea, CAN and NP offtake, post subsidy in budget FY17, 2) decline in gross margin due to weak domestic Urea/CAN/NP prices and 3) dealer discounts to clear out high inventory levels. On a cumulative basis, 9MCY16 earnings declined to Rs6.37 billion (EPS: Rs3.03) compared to Rs7.45 billion (EPS: Rs3.55) for 9MCY15, down 15%YoY on account of unprecedented adverse market conditions caused by weak farm economics and delayed implementation of subsidy on urea by the GoP.

LUCK announced its 1QFY16 results posting profit after tax of Rs3.24 billion (EPS: Rs10.01) as compared to Rs2.97 billion (EPS: Rs9.18) for 1QFY16. The reported earnings were higher than expected of owing to: 1) higher than expected topline resulting from 0.145 million tons clinker sales during the period and 2) improvement in gross margin due to cheaper coal inventories. Result Highlights included: 1) topline growth due to higher dispatched, 2) improvement in gross margin, 3) addition of 5MW WHR, 4) substitution of exports by domestic sales, 5) reduction in distribution cost owing to decline in export dispatches, 6) other income rising jumped due to interest income on higher cash balances, and 7) effective tax rate of 30%.

Pakistan market witnesses 23 percent increase in daily traded volume

The week ended August 05, 2016 was a volatile week as the benchmark PSX‐100 Index declined marginally to 39,390 levels. The decline was initially led by the banking sector in the backdrop of status quo in the monetary policy followed by selling pressures particularly in Cements on anticipated weaker dispatches attributable to Ramadan/Monsoon season slowdown effect. The point worth mentioning is that average daily traded volume increased by 23%WoW to 225 million shares. Leaders during the outgoing week were: PSMC, BAFL, KEL, SHEL and ICI, while laggards included: LUCK, PIOC, MLCF, KAPCO and MEBL.

Key developments during the week included: 1) Market Treasury Billions cut‐off yield posted a modest gain despite SBP maintaining interest rate unchanged, 2) Finance Minister and SBP governor alluded that there is no further IMF program under consideration, 3) PSMC announced increase in prices of its vehicle variants by 3% per unit in an attempt to maintain its profit margin, 4) Headline inflation rose by 4.12%YoY during the first month on the current financial and 5) SBP kept policy rate unchanged in its latest monetary policy statement.

Although, PSX‐100 Index is hovering near its highest levels, it is expected to remain volatile due to: 1) increase in political heat as opposition parties plan countrywide protests against the government, 2) weaker anticipated earnings in current result season owing to super tax and 3) volatile oil prices in spite of oversupply/surplus inventories. Financial result announcements of index heavyweights i.e. MCB, ABL and EFERT in upcoming week will likely to plunge Index downward on account of expected decline in earnings as a result of the imposition of super tax and impact of negative sector‐specific factors.

Recovering from initial Brexit shocks with major global economies vowing to unveil stimulus measures to boost economic growth, international equities rebounded sharply during the previous month with MSCI EM Index returning 4.9%MoM. In tandem, PSX‐100 Index closed the month 4.6%MoM higher at 39,529 points, just falling short of the 40,000 level. Volumes also depicted a healthy trend growing 9.8%MoM to average at 189.3 million shares during the month. MSCI led foreign interest was evident in July with foreigners buying equities worth US$26.8 million against a net selling of US$2.02 million a month ago (excluding foreign participation in EFERT divestment), building positions in Banks, Cements and OMCs. Amongst the main board, Automobiles and Parts, Cements and Commercial Banks garnered traction while Healthcare Services along with Multi‐utilities in the sideboard were key performers. Going forward, market's performance in Aug'16 is likely to be guided by the ongoing result season where we see strong earnings performance by Cements & Textiles. Banks are also expected to remain in the limelight with UBL's above expected 1QCY16 earnings setting the tone for the rest of the sector. That said, political pressures can come to the fore with opposition parties (PTI and PAT) likely to stage anti‐ government protests during the month.

In continuation of what has been a persistent trend now, Pakistan exports remained lackluster in June'16, declining to US$1.65bn. Similarly, FY16 exports were recorded at US$20.85 billion, marking a decline of 13%YoY from US$23.94 billion posted in the FY15. The fall came primarily on the back of a slowdown in textile and other commodity related sectors with textile and food group slipping by 8%YoY and 13%YoY respectively during the year. Going forward, despite anticipated weakness in Pak Rupee, analysts expect textile exports to remain under pressure primarily on: 1) slow Chinese demand, 2) adverse exchange rate limiting GSP plus benefits, 3) concerns of an economic slowdown in EU following Brexit and 4) low cotton production, down by 34%YoY.

Pakistan stock market driven by foreign investors

The bull run continued during the week ended 6th May 2016. The PSX‐100 Index crossed 36,000 mark, yet failed in sustaining this level and closed the week at 35,974 level, up 3.6%WoW, as investors calibrated portfolios in anticipation of Pakistan's inclusion in the Emerging markets club.

Additionally, the index heavy Oil & Gas sector was propelled by strength in global oil benchmarks. While setting aside the political uncertainty arising from revelations included in the Panama Papers, measures to be adopted in the upcoming FY17 budget remain a key consideration in setting investors’ expectations.

News moving the market included: 1) inflation increased to 4.17%YoY during April'16 from 3.94%YoY in March'16, mainly on the back of hike in food, fuel and rental indices, 2) PTA is set to hold auction for Next Generation Mobile Services (NGMS) spectrum (3G) on 11^th June’16 aimed at generating Rs42 billion revenues and 3) the Ministry of Finance has fiercely opposed allocation of gas from Mari field to EFERT, arguing that the fertilizer manufacturer has defaulted on payment of GIDC, whereas the Ministry of Petroleum & Natural Resources is seeking approval for allocating 60 mmcfd to Guddu power plant and 31mmcfd to EFERT.

After rejecting the terms of reference (TORs) put forward by opposition parties, Prime Minister Nawaz Sharif and his legal and political aides agreed to rope in opposition parties in negotiations to draw mutually acceptable terms for the proposed judicial commission to probe the Panama leaks.

Gainers at the bourse were: LUCK, MCB, NML, ICI and PTC, while scrips losing value were: AKBL, LOTCHEM, APL and HMB. Volumes dropped by one percent on week on week basis to 242.3 million shares, where volume leaders were: BOP, SNGP, PTC and TRG. Foreign participation took a healthy turn, with foreigners buying US$21.2 million worth equities during the week against net sell of US$12.4 million last week.

As result season comes to an unexciting close, investors look ahead to flashpoints, particularly upcoming MSCI's Annual Market Classification review (announcement scheduled on 14^th June’16) where Pakistan is hopeful for re‐entry into EM status. Anticipating this, investors are likely to shift interest to blue chip plays, likely to enter the EM index, namely LUCK, ENGRO, HBL and MCB. Furthermore, a rising CPI (April’16 at 4.2%YoY) has set the stage for reversal in the interest rate cycle, with expectations for a tightening to initiate from 4QCY16.

Due to the continuation of bullish momentum at the local bourse, benchmark PSX‐100 index offered return of 3.8%MoM in April'16 rising to 34,719 points, taking CYTD gains to a modest 5.8%. Rallying oil prices along with a strong corporate earnings season where selected sectors (Cements, Autos and Electricity) were seen on top. Average volume for the month hiking by a whopping 61.6% to 235 million shares against last 7-monthth average of 154 million shares. Despite a change for the good in volumes, foreign selling continued to be the itchy point with foreigners selling US$18.1 million worth equities taking CYTD net outflow to US$122 million. As regards sector specific performances, mimicking global oil price trends the Oil & Gas sector was seen taking charge, in what looked like ages, followed by Commercial Banks and Automobiles, while Cements and Fixed Line Telecommunication lagged behind.

Oil & Gas Regulatory Authority (OGRA) on Friday notified 38.3% or Rs76.5/mmbtu decrease in feedstock gas prices for fertilizer sector from Rs200/mmbtu to Rs123.41/mmbtu, in lieu of Rs70/bag agreed reduction in urea prices by fertilizer manufacturers. Following this recent development and significantly lower fertilizer offtake (demand growth revised down to 4.7 million tons from 5.2 million tons earlier) leading to poor 1QCY16 financial results.