Elixir Securities Limited – Weekly Review

Karachi, February 01, 2019 (PPI-OT): Pakistan Equity Market – Index Closes Above 41k Mark on Foreign Buying

KSE100 Index continued to rally into 5th straight week led by foreign buying interest, particularly in Banking stocks. The Index gained 848pts (2.1%) during the week, taking 2019TD return to 10.9%. Market activity also remained elevated during the week with average daily traded volumes inching up by 3.8%WoW to 175mn shares.

The index was mainly driven by Banks, Oil Marketing Companies (OMCs), Automobile Assemblers and Oil Exploration and Production Companies (E and Ps) contributing respective gains of 234pts (28%), 129pts (15%), 83pts (10%) and 74pts (9%) in the Benchmark Index.

Banks remained in limelight returning 2.2% during the week owing to foreign buying, surprise increase in Policy Rate by 25bps to 10.25% and SBP’s tacit signal of further monetary tightening in future.

Automobile Assemblers returned 6.4% during the week on supplementary budget’s recommendation of lifting ban on non-filers to purchase up to 1,300cc cars and policy to tighten loopholes for importing cars. Pak Suzuki Motors (PSMC) being the chief beneficiary of the ban rallied 27.6% during the week.

OMCs/refineries returned 7.0%/10.1% during the week on complete ban imposed on imports of furnace oil where previously K-Electric (KEL) was exempted from this restriction. Attock Petroleum (APL), Attock Refinery (ATRL), Byco Petroleum (BYCO), Hascol Petroleum (HASCOL), National Refinery (NRL) and Pakistan State Oil (PSO) returned 7.1%, 10.1%, 12.9%, 11.4%, 5.8% and 5.8%, respectively.

The State Bank of Pakistan’s (SBP) reserves jumped by USD1.5bn (23%) to USD7.0bn led by USD2bn inflows from Saudi Arabia and UAE where external debt and official payments caused less than equal increase in reserves.

Post market close, Pakistan Bureau of Statistics (PBS) posted inflation numbers where CPI General / Core Non-Food Non-Energy (NFNE) inflation clocked in at 7.2%/8.7%YoY in Jan-19 which was in line with our expectation of 7.1%/8.8%YoY. Inflation was mainly led by food inflation of 0.3%MoM, revision in house rent index by 2.4%QoQ, and 8.5% upward revision in average residential electricity tariffs.

Foreigners continued to remain the major net buyers for the second consecutive week, mopping shares worth USD12.3mn. Among the domestic investors, mutual funds and companies were the remained the major sellers offloading USD5.3mn and USD4.0mn, respectively.

Key news this week

First NFC meeting scheduled for Feb 6 (Economy) – Neutral

ECC okays launching of Rs200b Islamic Sukuk bond – Positive

Non-filers be allowed to buy vehicles of only up to 800cc: MPs (Autos) – Negative

Foreign exchange: SBP reserves surge 22.9%, cross $8b mark – Neutral

State Bank surprises market with policy rate hike – Negative for Capital Markets

Equity Market Outlook and Perspective

The Index has cumulatively returned 10.9% during 2019TD backed by strong buying interest mainly from foreigners. With US FED holding off interest rates and growing doubts of further rate hikes, foreign selling may remain muted going forward as well. Nonetheless, concerns continue to persist regarding IMF program which may not come through soon owing to immediate funding (availed from UAE and Saudi Arabia) and ongoing deliberations over the future course of policy actions.