JS Securities Limited – Pakistan Market Weekly Review

Karachi, December 15, 2017 (PPI-OT): Bear run continues for fifth consecutive week – index down 1.1% WoW

The index plummeted for the fifth consecutive week with benchmark KSE- 100 index posting 1.1% WoW decline to close at 38,646 pts level. However, a late recovery was seen on Friday after the Supreme Court rejected NAB’s appeal for the reopening of Hudaibya case. While political concerns continued to weigh down on the index, lack of clarity on the macroeconomic front also continued to dent investor confidence. A major development on the macroeconomic front was seen during the week as the State Bank of Pakistan (SBP) let the Rupee fall by 6% against the Greenback, reportedly after partially agreeing to IMF’s demands of over 15% demands.

Although it addressed concerns to some extent, the depreciation failed to excite market participants as it failed to meet expectations of perceived currency value. IMF’s positive comments on PKR devaluation and decoupling of economy and politics also failed to incite interest in the market. As a result of jumbled up political and macroeconomic concerns, foreign and local individual investors continued their selling spree and recorded net selling of US$8.4mn and US$17mn worth of equities.

Across the board selling was observed with heavyweights such as (1) Cements (down 6.0% WoW), (2) OMCs (down 1.1% WoW), (3) Banks (-0.5% WoW) and (4) Autos (down 3% WoW) extending losses. Some gains were posted by E and Ps (up 1.4% WoW) but performance remained insufficient to counter across the board free-fall. Market participation also suffered with average traded volumes (down 4.4% WoW to 135mn) witnessing decline. Apart from this, key highlights of the week were (1) PM saying that government will complete term at any cost, (2) approval of US$700mn allocation under Coalition Support Fund (CSF) program, (3) cement manufacturers coming under the spotlight on usage of groundwater in the Potohar region and (4) release of macro data indicating widening of trade deficit (+19.4% YoY) and drop in remittances (-2.6% YoY) in Nov-17.

IMF sees decoupling of politics and economy as positive

The IMF’s Mission Chief Herald Finger told journalists on Thursday evening that Pakistan made no formal request for any fresh bailout package from the IMF. He said that Pakistan successfully decoupled economy from politics as the country continued to achieve higher growth path for the current fiscal year as the Fund projected real GDP growth at 5.6 percent for fiscal year (FY18) against 5.3 percent achieved last FY17.

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