JS Securities Limited – Weekly Review

Karachi, March 15, 2019 (PPI-OT): Benchmark index performance reflects lack of triggers

Marking the 6th consecutive week to close in the red, the index settled at 38,307 points, down 1.7%. The week saw an average daily traded volume of 93mn (down 18%) shares at an average value of US$27mn per day (down 21%). On the political front, productive talks on the Kartarpur corridor suggest that relations with India seem to have started to normalize after a tense few weeks. Moreover, refineries came under pressure after reports that the International Maritime Organisation (IMO) will impose emission standards limiting the marine sector to using Furnace Oil (FO) with sulphur content of less than 0.5% from Jan-2020, thereby curbing the already weak demand for FO in the country. Resultantly, the Refinery sector (down 6.8%) was among the worst performing along with Cements (-4.4%), Engineering (-4.8%) and Automobile Assemblers (-4.9%).

On the other hand, both Textiles and Fertilizers outperformed the KSE-100 by 1.5%. The bourse witnessed Foreign net selling of US$15.6mn, up 350% WoW with a significant portion of the selling (US$13.3mn) witnessed in Oil and Gas Exploration. Furthermore, the Federal Bureau of Revenue enforced the Benami Act, effective retrospectively from Feb 1st 2017. Other significant news flows during the week include (1) receipt of US$1bn from the UAE and failure to secure a US$3.2bn deferred oil facility from the same (2) hike in car prices by INDU and HCAR following the imposition of 10% Federal Excise Duty (FED), (3) the government’s announcement to offer gas field concessions to foreign investors and to create a dedicated security force for them (4) SBP’s launch of the finance policy for low-cost housing and (5) increase of 41% in gas prices effective July 1st 2019.

SBP reserves remain flattish at US$8122.9mn

According to the SBP official website, foreign exchange reserves with the State Bank have remained flattish at US$8122.9mn, moving up just US$6.4mn from last week. Total reserves in the country were recorded at US$14,965.9mn, reflecting a non-material increase of US$9.7mn WoW.

LSM shrinks 2.3% in 7MFY19

The latest figures reflect a 2.3% decline in Large Scale Manufacturing (4.4% YoY decline in January-2019) mainly due to rising costs of production. While the weakening rupee has provided some support to exporters, it has taken its toll on import dependent production as oil and machinery become more expensive. Food, beverages, petroleum products, pharmaceuticals and iron and steel products all witnessed a decline in production.

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