JS Securities Limited – Weekly Review

Karachi, February 01, 2019 (PPI-OT): KSE-100 index going strong, week ends up 2% WoW

The KSE-100 index continued going north with 2.1% gains WoW, closing this week at 41,113 levels. By the end of the first month of the year, the benchmark index has more than recovered losses made during CY18 (-8.4%). The index has now witnessed five consecutive weeks of positive closing. Key drivers to the ongoing rally have been the (1) reform package announcement and (2) funding receipts from Saudi Arabia and the UAE. With the recent fund receipts, the State Bank of Pakistan’s reserves have jumped up to US$8.15bn, up US$1.5bn in a week.

Moreover, the Monetary Policy Committee announced the Policy Rate for the next two months at10.25%, reflecting an increase of 25bps. Participation, also increased during the week with average daily trading volumes increasing by 3.8% WoW to 175mn shares, while traded value declined by 5.8% WoW toUS$49mn. Net foreign buying continued with US$12.3mn totalling for the week, adding to US$19.7mn during YTD CY19, broadly witnessed in the banking sector (US$21.9mn). Major sector contributions streamed from (1) Refinery (+10% WoW) and (2) OMCs (+7% WoW). Moreover, after a 6% WoW increase in the Pharmaceuticals, the sector received unfavourable news during the end of the week where the Peshawar High Court stayed implementation of 15% hike in medicine prices.

Moreover, the Power Division allowed raising Rs200bn in syndicated Islamic Term Finance Facility to deal with circular debt in the ECC meeting held during the week, which will likely have positive earnings impact on Islamic Banks. Other news during the week were (1) repatriation of profit during 1HFY19declined by 37% YoY, (2) SBP released its 1QFY19 report where it mentioned 6.2% GDP target is unachievable on account of weak agriculture and industrial output, (3) Saudi crown prince may arrive to Pakistan on February 14, (4) Asian Infrastructure Investment Bank (AIIB)will invest over US$1bn in infrastructure projects, (5) petrol prices for Feb2019 have been reduced by Rs0.59/litre, (6) Prime Minister launched Pakistan Banao Certificates of three-year and five-year tenors and (7) zero percent ST on cotton import has been notified.

1HFY19 revenue collection at Rs2.17trn

Federal Board of Revenue (FBR) has provisionally collected net revenue of over and above Rs2,174bn during 7MFY19 against target of Rs2,354bn, reflecting a shortfall of Rs180bn and against Rs1,994bn during 7MFY18. The FBR has collected over Rs280bn in Jan-2019 against the target of Rs302bn for this period, reflecting a shortfall of Rs22bn.