Like other
international markets, Pakistan stock market once again plunged into negative
territory. During the week ended 12th February PSX‐100
index closed at 31,464 points (down 3.12%WoW) completely eroding the gains made
a week ago. Market volatility was led by anxious investors opting for profit‐taking
amid continued selling by foreign investors. During the week under review foreign
outflows were recorded at US$17.2 million against US$2.2 million outflows
recorded a week before.
Activity at
the market failed to recover, where average traded daily volumes for the week
declined to 141 million from 144 million shares. Key news flows driving the
market included: 1) the GoP signed a 15-year agreement to import up to 3.75 million
tons/year of LNG from Qatar at a price of 13.37% of Brent, to be imported by
PSO, 2) Baluchistan government announced lifting‐off the ban on
new projects of oil and gas exploration across the province and started negotiations
with PPL, OGDCL and some international exploration companies, 3) the GoP
borrowed over Rs116 billion at the rate of 6.10% through auction for 3‐year
Fixed Rental Rate GoP Ijara Sukuk and 5) GoP directed OGRA to allow recovery of
proposed Rs101 billion commercial loans to be taken by gas utilities from
consumers in lieu of building pipeline infrastructure.
Leaders at the
bourse included POL, SNGP, AGTL, and DAWH. The laggards were OGDC, FATIMA,
HCAR, BAFL and EFERT. As earnings season gaining momentum the prominent companies
scheduled to announce financial results include PSO, OGDC, PPL, DGKC, LUCK,
HUBC and ENGRO. Analysts expect volumes to recover in anticipation of stronger
corporate profitability. Although, persistent foreign selling continues to mar
the sentiments a rally in regional markets can also bring some respite to the
local market.
Pakistan’s
biggest integrated electric utility K-Electric (KEL) is expected to release its
1HFY16 financial results shortly. According to a forecast the company is
expected to post profit after tax of Rs15.4 billion (EPS: Rs0.56/share) reflecting
an increase of 17%YoY, while 2QFY16 earnings are expected at Rs8.9 billion
(EPS: Rs0.32/share), 14%YoY lower than levels seen last year. Profit before tax
for 1HFY16 is expected to rise to Rs14.4 billion, up 80%YoY, aided by: 1) a
1.4% reduction in T&D losses to 22.4% during the period under review, 2) decline
of 40%YoY in the cost of purchased electricity (currently at Pkr5.8/KwH) and 3)
a 29%YoY reduction in financial charges. Despite these improvements, analysts
caution about regulatory hurdles as dampeners to long term self‐sufficiency
of supply (shifting to coal) and approval of major agreements (Multi‐Year
Tarriff, Power Purchase Agreement). Prominent triggers to look out for are: 1)
greater than expected reduction in T&D losses from pre US$500 million T&D
revamp plan, 2) continuous decline in cost of purchased units, as FO prices
fall, reducing the burden of T&D losses born by the utility and 3)
significant headway on 700MW coal fired power plant to be set up with China
Datang Corp, the land for which has been procured.
Total auto industry
sales were recorded at 21,717 units, benefiting from the 'January Effect'
prevalent in the industry. Cumulative, 7MFY16 sales remained robust, at 133,437
units increasing by 57%, supported by strong growth in offtake from PSMC
(83,188 units sold, growing 90%YoY) and INDU (36,448 units sold, rising
24%YoY). Segment‐wise sales growth was led by the 800
and below 1000cc variants with sales growth of 85%YoY for 7MFY16 (44,594 units
sold), followed by the 1000cc segment rising 42%YoY (14,145 units sold) and the
1300cc and above segment increased by 22%YoY (49,168 units sold). These trends
in segment‐wise growth have flowed into the OEM's
dominating each segment. A historical trend analysis of the past 10 years
showcases January a good month.
