JS Securities Limited – Weekly Review

Karachi, December 07, 2018 (PPI-OT): Bears take control, KSE-100 index down 5% WoW

The KSE-100 index continued bearish momentum, however hitting with a heavier hammer this week with 4.8% WoW decline, closing at 38,562. We believe negative sentiments were broadly driven by concerns over lack of clarity on financial support from China and UAE. It is now expected that China may offer a US$2bn loan. Also, increase in interest rates and devaluation of the rupee against the greenback during the last trading session of the previous week (SBP foreign exchange reserves down by US$560m) also added to investor concerns over future profitability of the corporate sector. In addition, US$29mn selling from Mutual Funds also added to the ongoing pressure, where selling was mainly witnessed in the Cement (US$1.8mn), E and P (US$1.7mn) and Fertilizer (US$1.2mn) sectors.

Selling from Mutual Funds was mostly absorbed by the Insurance companies with net buying accumulating to US$18mn this week. Volumes improved to 163mn shares on an average daily basis, while daily traded value declined to US$58mn. Sectors that led the index decline were OMCs (-10% WoW), Engineering (-8% WoW), Autos (-7% WoW) and Cements (- 5% WoW). On sector-wise development, the government has allowed the Refinery sector to clear up their piling furnace oil inventory by means of exports; nonetheless the sector closed down 5% WoW. Moreover, the government has also decided to impose ban on furnace oil imports. Other key news during the week were (1) condition waived off for sugar millers to export sugar, (2) Atlas Honda (ATLH, +2% WoW) jacks up bike prices for sixth time, (3) foreign debt up 13% in 1QFY19 to US$96.74bn, (4) Pakistan Petroleum (PPL, -4% WoW) announces back-to-back discoveries this week and (5) Islamic Development Bank (IDB) commits US$1bn to finance TAPI pipeline project.

Nov-2018 CPI inflation soars to 6.5% YoY/0.1% MoM

Consumer Price Index (CPI) stood at 6.5% YoY during the month of Nov-2018, compared to 6.8% YoY in Oct-2018. Core inflation was the highest in around 4 years at 8.3% YoY in Nov-2018, showing rising inflationary pressures in the economy. Monthly food inflation receded by 0.6% MoM on the back of falling vegetable prices, which limited the uptick in headline inflation.

Cement sales fall 1% YoY to 3.9mn tons in Nov-2018

Local cement sales declined 7.1% YoY to 3.34mn tons in Nov-2018, taking overall cement dispatches down by 1% YoY to 3.90mn tons. Exports increased by 61.4% YoY to 0.56mn tons. Cement sales during 5MFY19 accumulated to 19.2mn tons, up 4.4% YoY.