Elixir Securities Limited – Pakistan Equity Market: Weekly Review

Karachi, June 22, 2018 (PPI-OT): Worst Performance in 44 Weeks

KSE Index nosedived 4.7%WoW (2,043pts) on persistent foreign selling and downward revision by Moody’s (outlook on Pakistan revised to negative from stable on vulnerable economic position).

Trading activity rose during the week with average daily traded volumes/value going up by 29%WoW/13%WoW to 170mn shares/USD61mn.

Commercial Banks, Oil and Gas Exploration Companies, Cements and Automobiles were the major index movers, resulting in declines of 668, 358, 218 and 102 points, respectively in the KSE100.

Commercial Banks fell 4.6%WoW owing to correction in Habib Bank (HBL) / United Bank (UBL) of 9.6%/6.0%WoW on concerns 1) regarding lower payout on additional capital requirement of CET-I (2% for HBL and 1.5% for UBL) and 2) persistent foreign selling.

Oil and Gas Exploration Companies fell 5.5%WoW owing to falling international oil prices on expectation of production increase by OPEC in its ongoing meeting with sources revealing 1mnbpd planned increase (but not immediate) to address supply deficit.

Cements/Automobiles declined by 12.5%/6.3%WoW mainly due to concerns regarding earnings attrition on account of rising costs with PKR/USD depreciation and potential slowdown in demand going forward. Lucky Cement (LUCK) single handedly contributed -111pts to the index decline, as it fell 7.7%WoW.

Foreign investors sold shares worth a massive USD24.5mn during the week, with the bulk of selling concentrated in Banks (USD21.2mn). On the domestic front, Mutual Funds and Individuals offloaded shares worth USD6.0mn and USD5.6mn, respectively. On the other hand, Insurance Companies and Corporates stood out as net buyers of USD15.2mn and USD14.6mn.

Key news this week

Trump aggravates trade war with China, imposes 25pc tariffs (Economy) – Negative

Shamshad calls on PSX brokers to do more under amnesty scheme- Positive

Moody’s downgrades Pakistan’s rating outlook to negative – Negative

Forex reserves up $341 million – Positive

OPEC strives for oil deal as Iran insists on modest rise in output – Neutral

This week’s top stories

Pakistan Economy – CPI Inflation Projected at 44-month High in Jun-18

Equity Market Outlook and Perspective

Foreign selling is expected to continue keeping a lid on returns owing to fears of further PKR depreciation, US Federal Reserve Bank’s (Fed) expectation of aggressive interest rate hikes and uncertainty with regards to Pakistan’s future in Financial Action Task Force (FATF) where the group meeting is expected to be concluded on 29th June. Pakistan would most likely remain on the Grey List for some time till it addresses the raised issues where categorization on Black List is highly unlikely. The official press release on conclusion of OPEC’s meeting will determine the course of international oil prices and local Oil and Gas Exploration returns.

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