The Week in Review For the period Feb 19, 2018 – Feb 23, 2018

News This Week

Reserves decline to USD18.8bn

Current account gap widens 48%

First-half fiscal deficit touches 2.2%

Shocking spike in July-December external loans

Textile exports grow 7% in seven months

Amreli Steels finalizes PKR2.0bn expansion plan

Ghandhara Nissan likely to resume Datsun car production

Furnace oil imports resumed

KSE-100 – Focus seen on blue chips

Stock Market Overview

Amid Supreme Court’s decision of disqualifying former PM Nawaz Sharif as a head of ruling party and rumors of placing Pakistan in terrorism financing watch-list, stock market remained volatile throughout the week where it recorded a low of 42,384. However, the benchmark index has closed at 43,267 points, exhibiting a decrease of 0.8%WoW. The outgoing week witnessed a decline of 7.5% in ADT while ADTV increased by 10.4%. Foreign investors remained net seller, exhibiting a net outflow of USD2.7mn, in this week as well.

NATF, BATA, POL, GADT and BWCL were the major gainers while MUREB, PIOC, ARM, MLCF, and FCCL were the major losers in the benchmark KSE-100 this week.

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Market Review Amid Supreme Court’s decision of disqualifying former PM Nawaz Sharif as a head of ruling party and rumors of placing Pakistan in terrorism financing watch-list, stock market remained volatile throughout the week where it recorded a low of 42,384. However, the benchmark index has closed at 43,267 points, exhibiting a decrease of 0.8%WoW. The outgoing week witnessed a decline of 7.5% in ADT while ADTV increased by 10.4%. Foreign investors remained net seller, exhibiting a net outflow of USD2.7mn, in this week as well. In major news during the week, textile exports exhibited a 7%YoY growth in 7MFY18 where the value added segment rose by 20%YoY on the back of Textile Package coupled with USD/PKR depreciation. Moreover, in context to ASTL’s expansion of rebar at SITE, company has scaled down its expansion target from 145k tons to 95k tons taking the total capacity at SITE to 275k tons. Also, after a three month ban the government ordered PSO to arrange import of 180,000 tons of furnace oil to replenish declining inventories available with the power sector. Furthermore, government allowed Ghandhara Nissan to go ahead with their brownfield expansion to import auto parts at lower rates for a period of three years. On the macro front, country’s foreign exchange reserves declined to USD18.83bn, down by USD139mn due external debt repayments. Also, government’s external loans surged by 826% in 1HFY18. Furthermore, current account deficit widened by 48% in 7MFY18 displaying the mounting pressure of the trade deficit which increased by 24% during the same period.

Outlook We expect the market to remain volatile if the country faces increased political activism following the decision of Supreme Court of disqualification of ex-PM as a head of ruling party coupled with hovering concerns over delay in the upcoming senate elections.

KSE-100 – Focus seen on blue chips

Date Open High Low Close Change Vol (mn)

19-Feb-18 43,704 43,946 43,512 43,573 -0.1% 127

20-Feb-18 43,588 43,589 42,865 43,295 -0.6% 170

21-Feb-18 43,510 43,624 42,834 42,920 -0.9% 188

22-Feb-18 42,701 43,628 42,384 43,529 1.4% 191

23-Feb-18 43,545 43,797 43,014 43,267 -0.6% 245

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News This Week

Economic highlights & Data points

Reserves decline to USD18.8bn | (Dawn): The foreign exchange reserves of the country fell by USD139mn to USD18.8bn during the week ended Feb 16, the State Bank of Pakistan (SBP) reported on Thursday. Shocking spike in July-December external loans | (BR): The government's reliance on external loans to finance the budget deficit increased by 826% in July-Dec’17 to PKR338.5bn from PKR36.5bn during the 1QFY18, according to Finance Ministry. Finance Division in its consolidated budgetary operation revealed that net external financing increased to PKR384bn to finance 2.2% budget deficit in July-Dec’17 as opposed to PKR7.9bn in 1QFY18. Current account gap widens 48%| (Dawn): Pakistan’s current account deficit widened by 48% in 7MFY18, reflecting the mounting pressure of trade deficit which jumped by 24% in the same period. The State Bank of Pakistan (SBP) reported on Tuesday that the current account deficit during July-Jan rose to USD9.16bn compared to USD6.18bn deficit noted in the same period of 2016-17. First-half fiscal deficit touches 2.2% despite provincial cash surpluses | (Dawn): Pakistan’s fiscal deficit touched 2.2% of gross domestic product (GDP) in the first half of this fiscal year despite reasonable cash surpluses offered by the four provinces. Infrastructure spending up 44% in July-Dec | (The News): The federal government has disbursed 44% more funds for infrastructure sector during July-December 2017-18 compared to the same period in the last fiscal, an official said on Wednesday. A total amount of PKR315.01bn was released for the infrastructure projects in the period under review against PKR218.20bn a year before. Pakistan borrows another USD500mn from Chinese bank | (Tribune): Pakistan has contracted another foreign commercial loan of USD500mn from the Industrial and Commercial Bank of China (ICBC), taking the Chinese financial institution’s contribution to supporting a strong rupee against the US dollar to USD1bn in just three months. The government contracted the loan on January 15 at a rate in the range of 4.5%, said sources in the finance ministry.

Sector and Corporate highlights

Textile exports grow 7% in seven months | (Nation): Textile exports witnessed over 7% growth during seven months (July 2017 to January 2018) of the current fiscal year due to PM’s incentives package and rupee depreciation against the dollar. Amreli Steels finalizes PKR2.0bn expansion plan | (The News): Amreli Steels Limited, country’s leading steelmaker, on Tuesday announced its board had approved the second phase of expansion to increase its annual production capacity of reinforcement bars to 750,000 tons within the next two years.

Ghandhara Nissan likely to resume Datsun car production | (Tribune): Ghandhara Nissan is likely to get government permission for resuming production of cars in Pakistan as the Board of Investment (BOI) and the Engineering Development Board (EDB) have agreed to treat the company’s plan as a Brownfield investment.

Furnace oil imports resumed | (Dawn): After a three-month moratorium, the government has ordered the state-run Pakistan State Oil (PSO) to arrange import of 180,000 tonnes of furnace oil for the power sector. The PSO has been asked to order three shipments of furnace oil, each containing 60,000 -65,000 tonnes, to meet fuel requirements of power plants, particularly in Karachi.

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) 81.9 81.3 -0.7% 83.6 79.2 92.6

Avg. Dly T/O (mn. shares) 198.8 183.9 -7.5% 228.3 196.4 208.0

Avg. Dly T/O (US$ mn.) 66.5 73.4 10.4% 85.1 77.4 98.3

No. of Trading Sessions 5.0 5.0 0.0 23.0 64.0 250.0

KSE 100 Index 43,627.1 43,267.2 -0.8% 44,907.2 40,266.2 49,062.3

KSE ALL Share Index 31,456.9 31,238.0 -0.7% 32,106.1 29,018.4 33,168.0

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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