The Week in Review For the period Jul 20, 2018 – Jul 26, 2018

News This Week

Forex reserves climb to USD15.7bn

Profit repatriation rises 10%YoY to USD2.3bn in FY18

Banks refuse to lend further for circular debt reduction

Non-textile exports surge 22%

Textile exports increase 9% to USD13.5bn in FY18

Urea sales up 22% in June

Hascol to acquire Marshal Gas’s LPG plant

Dutch firm takes 29% stake in Engro’s Elengy Terminal for

USD38mn

Pakistan-assembled Hyundai cars to roll out in March 2020

KSE-100 – Election surprise

Stock Market Overview

The week started off on a negative note, ahead of the general elections on July 25, 2018, awaiting final outcome. The results came as a pleasant surprise to many political analysts who had forecasted a hung parliament. To market’s surprise, PTI has reportedly secured 110-120 seats in NA which implies a much better lead position for PTI to form a stable government without having support from it’s nemesis namely PMLN and PPP. Optimism on the back of timely elections and clear dominance of PTI in NA led to a strong recovery in later half of the week, eventually closing at 42,089, up by 0.7%WoW. Foreign investors exhibited net inflow of USD0.5mn.

ASTL, ISL, PMPK, JSCL and DAWH were the major gainers while BOP, COLG, AGIL, NESTLE, and KTML were the major losers in the benchmark KSE-100 this week.

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Market Review

The week started off on a negative note, ahead of the general elections on July 25, 2018, awaiting final outcome. The results came as a pleasant surprise to many political analysts who had forecasted a hung parliament. To market’s surprise, PTI has reportedly secured 110-120 seats in NA which implies a much better lead position for PTI to form a stable government without having support from it’s nemesis namely PMLN and PPP. Optimism on the back of timely elections and clear dominance of PTI in NA led to a strong recovery in later half of the week, eventually closing at 42,089, up by 0.7%WoW. Foreign investors exhibited net inflow of USD0.5mn. During the week, urea offtake for the month of Jun’18 stood at 608k tons, down 43% YoY due to the high base effect. Consequently, urea inventory at the end of month stood at 167k tons. Moreover, Pakistan Oilfields Limited (POL) announced hydrocarbon discovery from exploratory well where 502bpd of oil and 1.2mmcfd of gas was discovered. On the other hand, 1,320MW coal-fired power plant of HUBC has been connected with the national grid after the NTDC completed a new 500kV transmission line. On the macro front, foreign exchange reserves decreased to USD9.0bn, down by USD53mn mainly accredited to debt servicing repayments. Pakistan’s textile exports rose by 9%YoY to USD13.5bn for FY18 as financial incentives improved competitiveness of the key export-oriented sector. Similarly, exports of non-textile products posted a robust growth of nearly 22%YoY in the outgoing fiscal year to USD9.7bn. This impressive increase in non-textile products outpaced the traditional export basket of textile and clothing owing to government extended cash support package.

Outlook Smooth transition and timely formation of new government is likely to instill investors’ confidence. However, investors are l ikely to track policy measures of the new government on key economic concerns as new government takes charge. Additionally, with upcoming financial result of companies, we expect earning expectations to play its role in driving the index.

KSE-100 –Election surprise

Date Open High Low Close Change Vol (mn)

20-Jul-18 41,811 41,811 41,157 41,222 -1.4% 223

23-Jul-18 41,218 41,222 40,418 40,464 -1.8% 109

24-Jul-18 40,494 41,462 40,464 41,339 2.2% 191

26-Jul-18 42,074 42,136 41,339 42,089 1.8% 254

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News This Week

Economic highlights & Data points

Forex reserves climb to USD15.7bn| (The News): Pakistan’s foreign exchange reserves increased 0.29% to USD15.7bn as of July 20 as compared toUSD15.7bn in the previous week, the central bank said on Thursday. However, foreign exchange reserves held by the State Bank of Pakistan were recorded at USD9.0bn, down USD53mn against USD9.1bn in the preceding week. Profit repatriation rises 10%YoY to USD2.3bn in FY18| (The News): Repatriation of profits on foreign investment in Pakistan rose 10%YoY in FY18, compared with the same period last year, the central bank data showed on Thursday. The country paid USD2.3bn as profits and dividend in July-June 2017/18, compared with USD2.1bn in the previous year. Banks refuse to lend further for circular debt reduction| (Tribune): The caretaker government has failed to secure PKR50bn in commercial financing for reducing the debt of energy companies as banks are reluctant to extend further credit because of heavy loans taken by the previous Pakistan Muslim League-Nawaz (PML-N) government. Non-textile exports surge 22%| (Dawn): Pakistan’s exports of non-textile products posted a robust growth of nearly 22%YoY in the outgoing fiscal year to USD9.7bn. The impressive increase in non-textile products outpaced the traditional export basket of textile and clothing which went up 8.7%YoY to USD13.5bn in FY18. Textile exports increase 9% to USD13.5bn in FY18| (The News): Textile exports rose around 9% to USD13.5bn for FY18 as financial incentives improved competitiveness of the key export-oriented sector.

Sector and Corporate highlights

Urea sales up 22% in June| (Tribune): Urea sales recorded a 22% increase to 601k tons in June 2018, while the off-take decreased 43% this year due to the high base effect of last year. Hascol to acquire Marshal Gas’s LPG plant| (Dawn): The board of directors of Hascol Petroleum Ltd authorised the company to acquire the liquefied petroleum gas plant/business from Marshal Gas Ltd (an associated company) at a consideration of PKR175mn. Dutch firm takes 29% stake in Engro’s Elengy Terminal for USD38mn| (Tribune): Royal Vopak of the Netherlands has signed a share purchase agreement with Engro Corporation for the acquisition of 29% shares in Elengy Terminal Pakistan Limited (ETPL). Pakistan-assembled Hyundai cars to roll out in March 2020| (Tribune): Pakistan is set to see locally-assembled Hyundai cars roll out in March 2020, said an official privy to the development, as South Asia’s second largest economy braces for greater variety of vehicles on its expanding roads.

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Stock Market – Last week in pictorals

Chart 1: KSE-100 Index

Source: PSX

Chart 2: KSE Advance/Decline Ratio

Source: PSX

Chart 3: Pak Foreign Portfolio Flows (US$mn; US$=PKR115)

Source: NCCPL

Chart 4: KSE- Volumes & Values

Source: PSX

Chart 5: Price to Money Ratio

Source: NCCPL

Chart 6: Off market activity

Source: PSX

Economy Watch

Chart 7: Revenue Collection (PKRbn)

Source: SBP

Chart 8: Forex Reserves (US$mn)

Source: SBP

Chart 9: Import & Export (US$mn)

Source: SBP

Chart 10: Foreign Exchange Rate (PKR/US$)

Source: SBP

Chart 11: 6-mth T-Bill Yield (%)

Source: SBP

Chart 12: Yield Curve (%)

Source: SBP

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Stock Market Synopsis Last week This Week %Change 1M 3M 12M

Mkt. Cap (US $ bn) 66.7 67.1 0.5% 70.0 81.1 89.6

Avg. Dly T/O (mn. shares) 199.8 194.2 -2.8% 163.6 153.6 174.5

Avg. Dly T/O (US$ mn.) 62.2 60.1 -3.4% 53.1 54.5 72.0

No. of Trading Sessions 5.0 4.0 0.0 22.0 61.0 250.0

KSE 100 Index 41,795.6 42,089.2 0.7% 41,246.1 45,460.9 45,908.4

KSE ALL Share Index 30,270.6 30,377.1 0.4% 30,018.4 32,921.2 32,227.5

Chart 13: KSE-100 Active Issues (ADTO-million shares)

Source: PSX

Chart 14: KSE-100 Least Traded Issues (ADTO- shares)

Source: PSX

Chart 15: KSE-100 Top Gainer (% change)

Source: PSX

Chart 16: KSE-100 Top Losers (% change)

Source: PSX

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