JS Securities Limited – Weekly Review

Karachi, January 04, 2019 (PPI-OT): New Year begins with hope, KSE100 closes up 1% WoW

The local bourse started off on a positive note, as the KSE-100 index closed at 37,547 levels, up 1% WoW. Market participation also improved as average daily traded volumes clocked in at 118mn shares, up +7% WoW, while traded value also increased by 14% WoW. Key net sellers were Insurance Companies with US$15mn, while this was broadly absorbed by the Mutual Funds with US$13mn of net buying. During the week, declining international oil prices finally benefitted Pakistan where in spite of announcing a cut in POL prices for the month, the government managed to increase taxes and levy on the same to increase overall revenue collection.

Sector-wise performance displayed Exploration and Production sector (+2.3% WoW) and Banking sector (+1.8% WoW) among the outperformers during the week, while Refineries (-2.2% WoW) remained among the laggards. On the other hand, fresh drug price notification released by Drug Regulatory Authority of Pakistan (DRAP) during the end of the week failed to excite investors as the Pharmaceuticals sector closed down 0.1% WoW. During the week, two leading automobile companies, Indus Motors (INDU, +0.03% WoW) and Pak Suzuki (PSMC, +3.6% WoW), announced vehicle price increases.

Other key news during the week were (1) Pakistan sent the Terror Financing Risk Assessment Report to FATF, (2) State Bank of Pakistan’s (SBP) reserves further declined by US$170mn during the last week, declining to US$7.29bn, (3) offshore gas exploration by Exxon Mobil and ENI is likely to start from next week, (4) profit margins on National Savings Schemes were increased by 1.5%-2.7%, reaching a six-year high, (5) US Senator has proposed free trade pact for Pakistan and (6) Unit 1 of Hub Power’s (HUBC) subsidiary supplied 660MW to grid on trial basis.

CPI reaches 6.04% YoY in 1HFY19

CPI registered a 6.17% YoY increase during Dec-2018; lower than the 6.50% YoY inflation in Nov-2018. CPI declined by 0.41% MoM, which can be attributed to 1.6% MoM and 0.7% MoM drop in food inflation and transport inflation indices, respectively. 1HFY19 CPI averaged at 6.04%, below the latest SBP’s FY19 CPI expectations of 6.5-7.5% YoY.

1HFY19 revenue collection up 3% YoY

Federal Board of Revenue (FBR) provisionally collected Rs1,779bn during 1HFY19, up 3% YoY and against target of Rs1,949bn; reflecting a shortfall of Rs 170 billion. For Dec-2018 alone, the collection clocked in at Rs405bn, against the target of Rs470bn, down 3% YoY, reflecting a shortfall of Rs65bn.