The Week in Review For the period Jan 29, 2018 – Feb 2, 2018

News This Week

Foreign exchange reserves fall by USD299mn to USD19.4bn

CPI inflation clocks in at 4.4% YoY in Jan’18 First half FDI down 3%

Policy rate raised by 25bps to 6%

FBR collects over PKR2trn in seven months

Punjab notifies ban on new cement plants

Plan afoot to clear circular debt

After eating up USD2.5bn in 2months, Pakistan to float another

USD1bn Eurobond

Mega Conglomerate to acquire Dewan Cement

KSE-100 – Breaks the bull run

Stock Market Overview

The benchmark index turned bearish during the week, posting a decline of 0.6%WoW, falling 250pts to close at 44,301pts. The week started with a surprise hike in policy rate of 25bps by central bank whereby companies with higher leverage reacted negatively. However, against expectation, financial sector failed to perform on the back of uncertainty in relation to pension case. ADT and ADTV witnessed a decline of 7.3%WoW and 22%WoW, respectively. After hefty buying spree, foreign investors were net seller with an outflow of USD12.6mn.

MUREB, GSKCH, PICT, TRG and ATLH were the major gainers while MLCF, UBL, FML, PMPK, and PAKT were the major losers in the benchmark KSE-100 this week.

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Market Review The benchmark index turned bearish during the week, posting a decline of 0.6%WoW, falling 250pts to close at 44,301pts. The week started with a surprise hike in policy rate of 25bps by central bank whereby companies with higher leverage reacted negatively. However, against expectation, financial sector failed to perform on the back of uncertainty in relation to pension case. ADT and ADTV witnessed a decline of 7.3%WoW and 22%WoW, respectively. After hefty buying spree, foreign investors were net seller with an outflow of USD12.6mn. During the week, Hascol Petroleum Limited reached an out-of-court settlement with a UAE-based energy firm to settle the claims related to a litigation dispute. The settlement involved an aggregate of USD9.5mn to be paid over a period of 18months. On the other hand, Punjab government notified ban on installation of new cement plants and capacity enhancement of the existing units. Moreover, Mega Conglomerate (Private) Limited has shown interest in acquiring controlling stake (87.5%) in Dewan cement limited (DCL). The company also intends to purchase entire shareholding of Dawood Hercules in the Hub Power Company at a purchase price of PKR106.5/share which is subject to regulatory and corporate approvals. On the macro front, country’s total foreign exchange reserves declined by USD299mn to USD19.4bn on the back of external debt servicing. Amid rapid depletion of foreign exchange reserves, Pakistan intends to float another Eurobond this month to raise ~USD1bn which is subject to approval of federal government. Moreover, CPI for the month of Jan’18 climbed up to 4.4%YoY due to hike in petroleum prices. With increase in petroleum prices and recent depreciation of PKR, average inflation is expected to remain downward sticky.

Outlook With upcoming financial result of companies, we expect fundamentals to take the front seat and earnings expectations to drive the Index. However, direction of FIPI flow will also dictate the market performance.

KSE-100: Breaks the bull run Date Open High Low Close Change Vol (mn)

29-Jan-18 44,724 44,856 44,338 44,457 -0.2% 192

30-Jan-18 44,492 44,615 44,081 44,233 -0.5% 282

31-Jan-18 44,253 44,534 43,996 44,049 -0.4% 289

1-Feb-18 44,103 44,436 44,049 44,255 0.5% 228

2-Feb-18 44,342 44,637 44,253 44,301 0.1% 284

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News This Week

Economic highlights & Data points

Foreign exchange reserves fall by USD299mn to USD19.4bn | (Dawn): The country’s total liquid foreign exchange reserves amounted to USD19.4bn on Jan 26, 2018 down USD285.9mn or 1. 5% from a week ago. Reserves of the SBP decreased USD298mn to USD13.2bn. The decrease in reserves is due to payments on account of external debt servicing and other official outflows. CPI inflation clocks in at 4.42% YoY in Jan-2018| (Dawn): Pakistan’s annual inflation climbed to 4.4% in January from 3.7% in the same month last year mainly due to hike in petroleum prices. However, it eased from 4.6% in December 2017 owing to a decline in the prices of some perishable products. Inflation, measured through the consumer price index (CPI), tracks the prices of around 480 commodities every month in urban centers across the country. FBR collects over PKR2trn in seven months | (BR): The Federal Board of Revenue (FBR) has recorded provisional net revenue collection of over PKR2trn during first seven months of the current financial year against PKR1,69bn collected during the same period of the previous fiscal year, recording an increase of more than PKR300bn. The figure of monthly collection is extremely encouraging as PKR228bn was collected during Jan’17 showing an increase by more than 19%. Plan afoot to clear circular debt | (BR): The incumbent government is reportedly preparing another plan to clear energy sector's circular debt which is hovering around PKR525bn mark piled due to continuous poor performance of power sector despite creation of new Ministry i.e. Ministry of Energy by clubbing together Power Division and Petroleum Division. Debt servicing balloons by 11% in July-Nov | (Dawn): The government paid PKR598bn in domestic debt servicing in July-November 2017, registering a year-on-year growth of 11%, according to the Monetary Policy Information Compendium that the State Bank of Pakistan (SBP) issued on Jan 26. Growing debt servicing is a sign of increasing debt stocks as the government relies heavily on borrowing for budgetary support and development expenditure.

Sector and Corporate highlights

Punjab notifies ban on new cement plants | (Nation): The Punjab government has finally notified ban on installation of new cement plants and enlargement of the capacity of the existing units on Saturday. The Industries, Commerce and Investment department issued the notification in this regard. The Standing Committee of the cabinet on legislative business has a couple of days ago recommended the inclusion of the cement industry in schedule-C of the industrial location policy 2002. Wall, floor tiles from China: LHC tells FBR to stop charging antidumping duties | (BR): Lahore High Court (LHC) has directed the Federal Board of Revenue (FBR) to stop charging final antidumping duties on the wall and floor tiles imported from China till further orders. The National Tariff Commission (NTC) had imposed antidumping duties on the wall and floor tiles imported from China at the range from 19.4% to 36% last year.

Hascol reaches settlement with Mena Energy | (The News): Hascol Petroleum Limited, a leading oil company, reached an out-of-court settlement with a UAE-based energy firm to settle the latter’s claims related to a litigation dispute, a bourse filing said on Monday. The settlement involves the company to pay the settlement amount over a period of 18 months in installments of USD2.3mn each on May 19, 2018, July 19, 2018, January 19, 2019 and July 19, 2019.” Mega Conglomerate to acquire Dewan Cement | (Dawn): Mega Conglomerate (Pvt) Ltd has appointed BMA Capital Management Ltd as managers to the offer for the acquisition of controlling shares in Dewan Cement Ltd (DCL), constituting up to 87.5% shares of the total issued by the company. The managers to the offer noted that 363mn shares forming 75% of the paid-up capital would be secured by ‘agreement’, while 61mn would be taken up through public offer. Mega Conglomerate to buy shares of Hub Power from Dawood Hercules Cement | (Dawn): The board of directors of Dawood Hercules Corporation has accepted an offer received from Mega Conglomerate (Private) Limited pursuant to which the Mega Conglomerate has agreed to purchase entire shareholding of Dawood Hercules in the Hub Power Company at a purchase price of PKR106.50 per share.

Stock Market – Last week in pictorals

Chart 1: KSE-100 Index

Source: PSX

Chart 2: KSE Advance/Decline Ratio

Source: PSX

Chart 3: Pak Foreign Portfolio Flows (US$mn; US$=PKR105)

Source: NCCPL

Chart 4: KSE- Volumes & Values

Source: PSX

Chart 5: Price to Money Ratio

Source: NCCPL

Chart 6: Off market activity

Source: PSX

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Economy Watch

Chart 7: Revenue Collection (PKRbn)

Source: SBP

Chart 8: Forex Reserves (US$mn)

Source: SBP

Chart 9: Import & Export (US$mn)

Source: SBP

Chart 10: Foreign Exchange Rate (PKR/US$)

Source: SBP

Chart 11: 6-mth T-Bill Yield (%)

Source: SBP

Chart 12: Yield Curve (%)

Source: SBP

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Stock Market Synopsis Last week This Week %Change 1M 3M 12M

Mkt. Cap (US $ bn) 83.4 83.0 -0.5% 78.8 79.6 94.4

Avg. Dly T/O (mn. shares) 275.4 255.2 -7.3% 245.9 174.8 218.3

Avg. Dly T/O (US$ mn.) 115.5 90.1 -22.0% 96.7 72.7 104.0

No. of Trading Sessions 5.0 5.0 0.0 24.0 65.0 251.0

KSE 100 Index 44,551.1 44,301.2 -0.6% 41,486.9 40,498.9 49,666.0

KSE ALL Share Index 32,043.3 31,887.2 -0.5% 30,272.8 29,053.4 33,766.7

Chart 13: KSE-100 Active Issues (ADTO-million shares)

Source: PSX

Chart 14: KSE-100 Least Traded Issues (ADTO- shares)

Source: PSX

Chart 15: KSE-100 Top Gainer (% change)

Source: PSX

Chart 16: KSE-100 Top Losers (% change)

Source: PSX

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