KARACHI: After hitting new highs for 2018 last week, Pakistan equities took a breather as KSE-100 Index declined 1.2 percent week-on-week (WoW) to close at 46,072 points.
While trading activity remained flat at an average of 247 million shares/day, average daily traded value declined 30percent WoW to $ 80 million, -indicating increased interest in small caps over the week.
With the dust settling on Amnesty Scheme announcement, market focus once again shifted towards deteriorating macro-economic environment. The latest blow in this regard came from Asian Development Bank (ADB) which now projects Balance of Payment constraints to slow down Pakistan’s GDP growth to 5.1 percent in FY19, from their projected growth of 5.6 percent in FY18. On the other hand, Moody’s Investor Services showed optimism on the recently announced Amnesty Scheme which can pave the way to partially alleviate Fiscal and External Account pressures for the country.
Banking stocks stood out as the largest contributors to market decline during the week. Having posted a strong rally on expectations of Amnesty Scheme, the stocks were undoubtedly due for a correction.
Pakistan Petroleum (PPL), Fauji Fertilizer (FFC), Dawood Hercules (DAWH), Honda Atlas Cars (HCAR) and K-Electric Limited (KEL) were the top contributors to the index upside during the week. The two fertilizer stocks (FFC and DAWH) rallied on rumors of favorable regulatory decisions on Government Infrastructure Development Cess (GIDC – cess/surcharge on gas), subsidy and urea prices. PPL stood out as it caught up to the recent rally in global crude oil prices (+8%WoW) and market expectations of potential inclusion in MSCI EM Index via the upcoming Semi-annual Review (in May-18).
On the other hand, HCAR paired part of the losses it has been posting over the past few months as the company registered a phenomenal growth of 19%MoM / 41%YoY in its volumetric sales for Mar-18. KEL rallied 3%WoW as the Federal Cabinet ratified the decision of Cabinet Committee on Privatization (CCoP) for issuance of National Security Certificate (NSC) for sale of KES’ 66.4% shares of KEL to Shanghai Electric Power. Note that the deal is still in limbo due to disagreement on Multi-year Tariff for the company.
Foreign Portfolio Investment was recorded at $ 17.5 million for the week, taking 2018TD net inflows to $ 52.2 million. On domestic front, Individuals and Mutual Funds mopped up shares worth $ 11.9 million and 6.6 million, respectively while Companies resorted to selling of $ 22.0 million.
“Crude oil gained 8% during the outgoing week owing to tension in Middle East, while E&P stocks failed to catch up to the rally owing to overall trend of profit taking. We thus expect the sector to come in the limelight in the coming week, particularly as the companies start to announce their financial results, starting with Pakistan Oilfields (POL) and Mari Petroleum (MARI) on Monday, 16th April. Other stock specific activity will also be observed as Financial Result Announcement Season enters into full swing from next week”, said Elixir Research Department’s report.
Published in Daily Times, April 16th 2018.