Market Weekly: KSE 100 bounces back, gains 0.99 pc in November

Pakistan sells $2.5billion Eurobonds and SUKUKs, Investors to watch Engro closely

LAHORE: The outgoing short week saw Pakistan Benchmark KSE 100 slip to new lows before bouncing back to close the week little changed at -238 points or -0.6 per cent. The week traded under the influence of the political uncertainty in the country and struggled to perform.

The benchmark KSE 100 index which touched its peak of 53,127.24 points on May 25 has since depreciated 25 per cent during the week on Tuesday, November 28, meanwhile an unstable government, deteriorating economic fundamentals and ongoing saga within the finance ministry have added to the turmoil.

The market gained 0.99 per cent in November, closing at 40,010.36 points. Overall the week saw a -0.6 per cent change, with a market cap at Rs 8.4 trillion or $ 79.4 billion. Despite political unrest, the market gained both in volume and value during the week, with a surge from $ 90 million to over $ 140 million on Thursday, November 30.

The week opened with a KSE market capitalisation at $ 79.31 billion and closed with +$ 0.09 billion increase.

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Local banks and funds participated in sector-wise gross buying and selling with a net change of $ 3.2 million and $ 4.4 million, respectively. Local funds bought $ 17.9 million worth of Fertilizers while selling $ 10.3 million while selling $ 10.1 million in Oil and Gas marketing against $ 0.9 million gross buying.

Top trading points during the week were outlook on closure of furnace oil power plants in light of rising LNG imports (and allied sector impact), speculation in outcome of KEL’s review petition scheduled for December 5, ENGRO’s removal from MSCI EM Index, OGRA’s proposed revision in Gas companies (SSGC/SNGP) tariff structure, and Pakistan’s sovereign bond issue raising $ 2.5 billion to shore up FX reserves. Average volumes rose 16 per cent week on week basis (WoW), while value surged 63 per cent to $ 76.3 million due to high turnover in blue chips ENGRO ($ 21 million), SNGP ($ 5 million), ATRL ($ 4.1 million), HBL ($ 4 million).

Stocks including PPL (-3 per cent WoW), SNGP (-8 per cent), LUCK (-3 per cent), DAWH (-5 per cent) and HUBC (-3 per cent) held 235 points from the index, while UBL (+5 per cent), ENGRO (+3 per cent), PAKT (+13 per cent), TRG (+9 per cent) and MCB (2 per cent) added 248 points.

On the sector capitalisation front; OMCs and Refinery shed 4 per cent apiece, E&Ps and Cements were down 2 per cent each, Auto Assemblers, Insurance, Fertilizer and Textile lost around 1 per cent, Power was flat, Banks gained 1 per cent, Food was up 3 per cent.

Sector-wise, Tobacco (+10 per cent), Synthetic and Rayon (+5 per cent), Wollen (+3 per cent) and Banks (+2 per cent) where top gainers based on market capitalisation return, meanwhile Oil and Gas(-4 per cent), Refinery (-4 per cent), Mutual Funds (-4 per cent), Vanaspati (-4 per cent) and Jute (-10 percent) remained lagged behind.

Foreigners sold $ 39.5 million during the week compared to selling of $ 6.3 million last week. On the local front, individuals and insurance sector were net buyers of $ 8.6 million and $ 8.5 million, respectively. Selling was concentrated in Fertilizer ($ 29.5 million) and Banks ($ 5.5 million) whereas buying was seen in OMC sector to the tune of $ 2.4 million.

During the month of November 2017, KSE-100 was up 1 per cent as compared to 6.5 per cent fall in October 2017, while during 2017TD the market was down by 16 per cent.

Dar-es-Salaam Textile Mills, Packages Limited and Muree Brewery Co Ltd held their board meetings on November 30 meanwhile Philip Morris (Pakistan) Limited is scheduled to hold one on Friday, December 8 next week.

Murree Brewery (MUREB) has accorded its approval in principle to set up new glass manufacturing plant which would double their existing capacity for glass production. Meanwhile, the management is expected to be actively looking to negotiate the purchase of suitable land for the purpose.

Century Paper and Board Mills (CEPB) has finalised expansion plan with Posco Daewoo, Korea as EPC contractor for new Coated Board plant with a capacity of 130k tons per annum. It was also reported that these parties have signed an agreement worth Rs 13 billion.

Treet Corporation (TREET) informed that the trial production for the battery project has started and commercial production will start soon after trials.

Exide Pakistan (EXIDE) reported 1HMY18 EPS of Rs 12.1 down 79 per cent YoY due to 10 per cent sales decline and 12 points margin contraction.

On economic front, during the week Pakistan sold $ 2.5 billion worth Eurobond and Sukuk. This will likely boost Pakistan’s Foreign Exchange Reserves, providing much-needed relief. The government raised $ 1 billion from 5-Year Sukuk at 5.625 per cent and $ 1.5 billion from 10-Year Eurobond at 6.875 per cent.

According to the privatisation commission, the Pakistani government is seeking bids by January 2, 2018, for financial advisers’ consortium to privatise Mari Petroleum (MARI). The proposal seeks consortium of not more than 3 members including global coordinator, consultant and book runner as government. seeks to divest up to 18.39 per cent shareholding in MARI.

Pakistan’s first quarter, July-September 2017, statistics released by Ministry of Finance show that debt repayments rose by 7.5 per cent to Rs 445 billion, defense expenditure rose by 20.5 per cent to Rs 182 billion, budget deficit rose by 1 per cent to Rs 440 billion meanwhile the government met deficit through domestic and external borrowings. Domestic borrowing stands at around Rs 432 billion and external borrowing Rs 8 billion. Petroleum levy rose by 22 per cent to Rs 44 billion. Tax revenue collection increased by 21 per cent to Rs 911 billion while current expenditure rose 16 per cent to Rs 1,240 billion.

In other news, Saudi Energy Minister Khalid al-Falih said that OPEC’s consensus was “almost complete,” before adding he did not anticipate an exit to the deal in the first six months of 2018, which might spark interest in E&P and OMCs during next week.

Topline Securities Analyst Adnan Sheikh while talking to Profit commented: “Engro’s removal from the MSCI emerging markets index has made no change on the company’s fundamental outlook, while the unwarranted price correction has made valuations attractive.” The script will be particularly interesting for investors and bargain hunters due to its price point.

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Eleazar Bhatti
The writer currently serves as the Content Manager at Profit by Pakistan Today and is an economics graduate from Leeds Business School in the UK. He can be reached at [email protected] or at twitter.com/eleazarbhatti.
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