Pakistan Stock Exchange index up 2.58%WoW

Pakistan Stock Exchange maintained its bullish momentum during the week ended on April 26, 2024. Despite some profit-takings, challenged its previous highs and closed the week at its highest ever level of 72,742 points, marking a weekly gain of 1,833 points or 2.58%.

Overall, the positive momentum was largely driven by anticipation of investments from Saudi Arabia, the successful visit of Iran’s President, and inclusion of Pakistan in the IMF’s executive board agenda.

On the macroeconomic front, trends remained encouraging. Firstly, current account balance for March 2024 clocked in at a surplus of US$619 million, taking 9MFY24 total CAD to US$508 million, down by 87%YoY.

Foreign direct investment in March witnessed an increase of 89%MoM, reaching US$258 million.

Inflation is expected to ease; with April 2024 CPI estimated at 16.9%YoY compared to increase of 36.4%YoY during the same period last year. This easing inflationary pressure signaled monetary easing to investors, which resulted decline in secondary market yields, with the yield on 12-month paper decreasing to 20.21%. The weekly inflation index, SPI has been on a downward trajectory for the past two weeks, indicating a favorable outlook for inflation for next month as well.

Consequently, the possibility of monetary easing beginning in the upcoming monetary policy meeting scheduled for Monday cannot be ruled out.

On the flip side, concerns regarding smuggling have begun to emerge, particularly in the petroleum sector, which is beginning to impact the refinery sector.

With the market enjoying positivity, participation also improved WoW with average daily traded volume increasing to 650 million shares as compared to 492 million shares in the earlier week, up 32%WoW.

Foreign exchange reserves held by State Bank of Pakistan declined by US$74 million to US$7.98 billion as at April 19, 2024. PKR depreciated by 0.03%WoW to close at 278.4/US$.

Other major news flows during the week included: 1) Pakistan's IT exports were up 37% to record US$306 million in March, 2) RDA inflows rose to US$7.66 billion, and 3) GDP expected to grow 2.6% during FY24.

Top performing sector were: Fertilizers, Synthetic & Rayon, and ETFs, while Tobacco, Miscellaneous, and Refinery were amongst the worst performers.

Flow wise, major net selling was recorded by Insurance companies with a net sell of US$13.1 million. Mutual Funds absorbed most of the selling with a net buy of US$6.0 million.

Top performing scrips of the week were: FATIMA, DGKC, AVN, EFERT, and FFBL, while laggards included: FHAM, PAKT, PSEL, BIPL, and NRL.

Looking ahead, the upcoming monetary policy meeting scheduled for April 29, would remain in the limelight, with start of monetary easing poised to further support the ongoing bullish trend of the market, that would be led by debt-heavy sectors.

Additionally, the disbursement of the third tranche of the IMF’s SBA and initiation of talks with IMF for next EFF will be closely monitored.

Given the market at its highest, analysts advise investors to focus on fundamentally strong companies.

   

 

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.