Karachi, January 04, 2019 (PPI-OT): Pakistan Equity Market – Low Steam January Effect
KSE100 Index rose by just 1%WoW (380 pts) to close at 37,548 as the January Effect remained low steamed likely due to economic uncertainty and lack of triggers. As such, market activity continued to remain dull with minor increase in Average daily traded value/volumes by 7%/14%WoW to USD41mn/118mn.
Index was mainly driven by Commercial Banks as it returned 1.8%WoW contributing 244pts (66%) on renewed buying interest.
Oil and Gas Exploration sector returned 2.3%WoW led by 10%WoW rally in Brent to USD57/bbl. Recovery in oil prices was attributable to 0.46mn bpd lower oil production by Organization of Oil Exporting Countries (OPEC) during Dec-18 an early start towards 1.2mnbpd cut to be enforced by OPEC+ from Jan-19. Individually, Oil and Gas Development Company (OGDC), Pakistan Petroleum (PPL), Mari Petroleum (MARI) and Pakistan Oilfields (POL) returned 1.9%, 1.6%, 4.3% and 3.6% WoW, respectively.
Oil Marketing Companies (OMCs) remained under pressure due to dismal sales during Dec-18 which were down 27%YoY mainly attributable to 53%/27%YoY lower FO (Furnace Oil) / HSD (High Speed Diesel) sales. Amongst the companies, Attock Petroleum’s (APL) outperformed as its sales grew by 9%YoY/34%MoM. Pakistan State Oil (PSO) and Hascol Petroleum (HASCOL) were the worst hit during the month, with sales down by 46%YoY each. HASCOL’s 36%YoY/9%MoM decline in Motor Spirit (MS) sales was worst in the segment relative to other OMCs. Resultantly, APL returned 3.5%WoW while HASCOL was down 5%WoW.
On economic front, State Bank of Pakistan’s (SBP) foreign exchange reserves declined by 2.3%WoW (USD170mn) to USD7.3bn as at December 28, 2018. The decline came on the back of debt servicing and other official payments. Total liquid forex reserves held by the country stood at USD13.8bn.
Consumer Price Inflation (CPI) came down by 30bps to clock in at 6.2%YoY in Dec-18 (vs. 6.5%YoY in Nov-18) as food inflation remained down (mainly due to lower fuel and food inflation). The estimate was lower than our expectation of 6.7%YoY mainly due to sharp decline of 21.7%MoM in fresh vegetable prices.
Foreign selling stood at USD0.5mn for the week. Amongst the local participants, Insurance companies remained the biggest seller with net selling of USD14.7mn. This was mainly absorbed by Mutual Funds net buying of USD13.4mn.
Key news this week
Suzuki announces fresh hike in prices (PSMC) – Positive
Oil sales fall 32pc to 9.2 million tons in July-December (Oil and Gas) – Neutral
Consumer price inflation slips to 6.2 percent in December (Economy) – Positive
Foreign exchange: SBP reserves dip 2.28%, amount to $7.29b (Economy) – Negative
Opec oil output posts biggest drop since 2017 (Oil) – Negative
This week’s top stories
Hub Power Company Limited – Rights Issuance on Cards?
Equity Market Outlook and Perspective
While January Effect shot off on a weaker note, it may surprise with fresh equity injection. In a separate development, Crown Prince of Abu Dhabi Sheikh Muhammad bin Zayed Al Nahyan will arrive in Islamabad on January 6th. Any development with regards to fresh investment plans may induce interest in equities.