Daily Times

Karachi: Pakistan equities closed almost flat on Wednesday amid pressure in oil stocks following a dip in international oil prices to near $52/barrel. The benchmark KSE 100 index closed; up by 15 points or 0.03 percent to 49,874 level.

Filch affirmed Issuer Default Ratings, renewed institutional interest in banking and cement stocks supported the index to close above session lows. Strong earnings outlook in cement, banking and auto scrips played a catalytic role in higher close in the earnings season at PSX, observed Ahsan Mehanti, senior equity analyst.

Notably, most activity was focused in sideboards and speculative plays while major sectors apart from Financials and select E&Ps garnered little interest. There were lower-than-expected earnings announcements by MCB Bank and Engro Fertilizers, according to analysts at Elixir Securities.

MCB reported below expectations 4Q2016 results mainly on the back of a one-off provision expense of over Rs1 billion during 4Q2016 as per the management. This provisioning is taken as per objective classification (SBP rules) as the company was classified in loss category. Net Interest Income (NII) of the bank was down 19 percent YoY mainly due to maturity of high yielding Pakistan Investment Bonds (PIBs) and decline in interest rates, which was generally anticipated. To recall, banks had booked major chunk of PIBs in 2012-13 at yields of approximately 12 percent out of which a major chunk retired in 2016. Since than interest rates have come down by around 6% thus affecting the margins and NII of the bank. This led to earnings decline of 15 percent.

Engro Fertilizers also announced results and registered top-line decline of 14 percent YoY for 4QCY16 despite an uptick in Urea off take, seasonality and government measures, which increased by 8 percent YoY. Low prevailing retention price in the domestic market on the back of discounts offered to push urea volumes upward kept net revenues of the company in check. Gross profit for the company fell 34 percent, as per our estimates, after adjustment for subsidy, gross margins, declined by 3 points YoY, to 24 percent. Distribution cost grew by 45 percent YoY to Rs 3.2 billion in 4Q2016 which was higher than expectations given fertilizer off-take during the period and translated in to operating profit of Rs 2.3 billion 4Q2016 (down 24 percent YoY).

PTC also fell by 5.05 percent as no payout was announced by the company in its annual result with consolidated EPS of 0.32/share. The company posted loss for 4Q2016, an impact of Voluntary Separation Scheme (VSS) offered by the company during late last year amounting to Rs10 billion, however only Rs 4.5 billion expense was booked during the quarter (the nature of the expense is dependent on employees opting for the scheme).

In another major development, National Tariff Commission (NTC) notified anti-dumping duty on imported Chinese galvanized steel in the range of 6 percent to 41 percent. “This is in line with our expectations. As per our report dated February 6, 2017 on International Steels Limited (ISL), we had stated that NTC was expected to notify anti-dumping duty on imported galvanized Chinese steel soon. ISL’s current capacity to produce galvanized coil stands at 400, 000 Tons while total rerolling capacity currently stands at 550, 000 Tons. During 1HFY17, company produced 158, 000 tons of galvanized coils while 80,000 tons of cold rolled coils, taking total production to 236,000 tons. The company expects total volume to pass the 500,000 marks during FY17. This led ISL and INIL to close at their upper limit of 5 percent”, according to a report by topline Securities.

Overall, volumes increased by 25 percent to 498 million shares, while value rose by 20 percent to Rs 20.7 billion/$197 million. On Tuesday 397 million shares worth Rs17.2 billion/$163 million were traded at the bourse.

Lotte Chemical topped the volume leaders’ list with 39 million shares traded followed by Dost Steel 37 million, Power Cement 36 million, Bank of Punjab 31, Media Times 22 million and K-Electric 19 million.

Shares of 426 companies were actively traded at the bourse out of which shares of only 236 companies ended in green, 177 in red, while 28 remained unchanged.

Market analysts expect that the market will remain choppy in the near-term with KSE100 Index finding strong resistance at the 50,000 level.