JS Securities Limited – Weekly Review

Karachi, February 23, 2018 (PPI-OT): Investors remain in ambiguity, as KSE-100 index closes 0.8% WoW lower


Ambiguity played with investors’ sentiments at the bourse during the week as conflicting news emerged over FATF putting Pakistan back on the terrorist financing watch list. A federal minister, mid-week, had claimed Pakistan has been given a 3-month reprieve; however news flows that emerged on Friday during trading hours suggested of no such reprieve. On the domestic political front as well, uncertainty hovered over the Senate elections as Supreme Court declared Nawaz Sharif ineligible to head PML-N, and resultantly nulled and void all the decisions taken under his leadership after his reelection as the party chief, including the nominations filed by PML-N for the Senate elections.


However, the Election Commission later decided to treat PML-N nominees for the Senate elections as independent candidates. From macroeconomic vantage point, the week did not fare any better either, as release of latest numbers continue to reflect cracks on the external account front. The C/A Deficit for Jan-2018 clocked in at US$1.62bn, 27% MoM higher (US$1.3bn in Dec-2017). As a result, the country continues to bleed foreign exchange reserves, which further declined by US$139mn during the week to US$18.83bn – lowest since Nov-2017 (pre bond issues level), in spite of Pakistan procuring additional US$533mn commercial loans from foreign banks in Jan-2018.


As per PBS statistics, Petroleum Group imports increased by 49% YoY in Jan-2018, whereas Textile exports edged up by only 2% YoY. Large Scale Manufacturing also contracted by 1.4% YoY in Dec-2017. Stock specific activity was witnessed, led by announcements and expectations of corporate results, where National Foods (NATF, +13% WoW) rallied on the back of expectations of a strong 1HFY18 result, while Cements stocks like Pioneer Cement (PIOC, -9% WoW) and Maple Leaf (MLCF, -7% WoW) felt the heat given weak financial results. Engro Corp. (ENGRO, +1% WoW), Pakistan State Oil (PSO, -3% WoW) and National Bank (NBP, -4% WoW) remained volatile due to unconvincing corporate announcements.


Pakistan Oilfields (POL, +10% WoW) was a clear outperformer after the release of reserves numbers by PPIS, confirming Jhandial reserves at higher-than-previously envisaged. Pak Elektron (PAEL, -5% WoW) came under pressure on Friday after World Bank announced the debarment of the company for 33 months. Hence, the benchmark KSE-100 index closed 0.8% WoW lower at 43,267. Activity remained muted with avg. volumes declining by 7% WoW, though avg. traded value increased by 10% WoW. The local Mutual Funds and Foreign investors were key net sellers of US$9mn and US$3mn, respectively while local Insurance companies turned out as net buyers of US$14mn.