Karachi, November 15, 2019 (PPI-OT): Weekly Review
The KSE-100 index built on the bullish momentum of the previous weeks, supported by conclusion of IMF’s first review. A staff mission of IMF on 8th Nov’19, Friday concluded its visit to Pakistan with all praise to authorities for over-performing on first quarter targets under the $6 billion Extended Fund Facility, paving way for the disbursement of $450 million early next month. The first session of the week thus closed +825pts, or up 2.29%. In a large move to widen tax net and check evasion, the government also decided to evolve a comprehensive plan for nationwide tax assessment and documentation drive to bring untapped sectors in the net.
PM Imran Khan tasked the tax department for coming up with a detailed plan until Nov 30, which will envisage measures to be implemented over the next two years. On local political front, the JUI-F led Azadi march fizzled out, as JUI-F chief called off the party’s sit-in in Islamabad on 13th Nov’19, leading to market rally 401 pts (up 1.09%) during KSE-100’s third trading session. Other major factors building market’s momentum during the week included: (i) pick up in foreign investment in treasury bills (US$267mn during the first two weeks of Nov’19), (ii) SBP’s decision to increase loans for the exporters by Rs100 billion, (iii) allocation of additional Rs250 billion to resolve the problem of circular debts, (iv) tax incentives for the companies involved in construction of houses, (v) allowing manufacturing sector an advance payment of upto $10,000 for import of raw materials and spare parts to spur LSM sector and (vi) trade deficit shrinking by 29/34% YoY in Oct’19/4MFY20.
Major data released during the week included auto sales data released by PAMA, which indicated 56% YoY decline in car sales for Oct’19, owed to a slowdown in economy and higher car prices. Top performers in AKD Universe during the week included HASCOL (+27.41%WoW), ASTL (+26.73%WoW), CHCC (+25.02%WoW), PIOC (+21.75%WoW) and GWLC (+17.71%), while FFC (-2.10%), and EFERT (-0.91%) were major laggards. Average daily turnover significantly improved 28%WoW to 311mn shares. BOP (106.03mn shares), PAEL (57.34mn shares), UNITY (56.16mn shares), TRG (54.77mn shares) and FCCL (50.07mn shares) remained major volume churners.
The upcoming week’s sentiment will be shaped by the monetary policy statement (date not announced yet). We expect status quo in the MPS, where weak reserve buffer stands as the major impediment in rate cuts in near term, in our view. Relative calm on the political front amidst positive macro reads (keep an eye on foreign portfolio inflows in debt market and Oct’19 CAD), the market is likely to continue its positive momentum in the weak ahead.