PSX registers marginal decline

December 03, 2017

LAHORE - The benchmark KSE 100-index of Pakistan Stock Exchange registered only a marginal decline of 0.6 percent WoW to close at 40,010 points, thanks to a timely resolution of issues between the government and religious parties. The sentiments progressively improved during the week as the Prime Minister agreed to utilize local furnace oil to run power plants, giving some respite to oil refineries, which had come under pressure during the past week due to sudden shift in government's policy of using RLNG in place of furnace oil. The week also brought in new hope for K-Electric (KEL, +5.16 percent WoW), where expectations are starting to build again over completion of strategic sale of the power utility to Shanghai Electric as NEPRA may look to reconsider its multi-year tariff. On the last trading day, news emerged of Pakistan successfully raising $2.5b through $1.5b of 10-yr Eurobonds and $1.0b of 5-yr Sukuks from the international bonds market. The pricing terms also appear favorable given that the profit rates on Eurobonds and Sukuks settled at 6.875 percent and 5.625 percent, respectively vis-a-vis Initial Pricing Talks (IPT) of around 7.0 percent and 6.0 percent, respectively. The week finished off with Engro Corporation (ENGRO, +3.29 percent WoW adjusted for Rs7.0/share dividend) closing strongly on MSCI rebalancing day, even though the stock was downgraded from MSCI Global Standard Index to MSCI Global Small Cap Index; indicating strong local appetite. However, gas utilities (-7 percent WoW) came under pressure as OGRA is beginning consultation on revising their rate of return model. During the week, foreigners were net sellers of $39.4m, whereas local individuals were net buyers of $8.6m.

Experts said that outgoing short week saw benchmark KSE-100 slip to new lows before staging a bounce to close the week little changed.

Stocks including PPL (-3 percent WoW), SNGP (-8 percent), LUCK (-3 percent), DAWH (-5 percent) and HUBC (-3 percent) held 235pts from the index, while UBL (+5 percent), ENGRO (+3 percent), PAKT (+13 percent), TRG (+9 percent) and MCB (2 percent) added 248 points. On the sector capitalization front; OMCs & refinery shed 4 percent apiece, E&Ps & cements were down 2 percent each, auto assemblers, insurance, fertilizer and textile lost around 1 percent, power was flat, banks gained 1 percent, and food was up 3 percent.

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

During the month of Nov’17, KSE-100 was up 1 percent as compared to 6.5 percent fall in Oct’17, while during 2017TD the market is down by 16 percent.

Saudi Arabia fully expects OPEC members and allied producers to agree to an extension to supply cuts. Ahead of an announcement over oil output policy later in the day, 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.

Pakistan will receive payment of $2.5b against Eurobond and Sukuk issue during first week of December; amount will boost Pakistan’s foreign exchange reserves. Govt raised $1b from 5-year Sukuk at 5.625 percent and $1.5b from 10-year Eurobond at 6.875 percent.

Government sees bids by January 2, 2018 for financial advisers consortium to privatize Mari Petroleum (MARI), Privatization Commission said in newspaper advertisement. Proposal seeks consortium of not more than 3 members including global coordinator, consultant and book runner as govt seeks to divest up to 18.39 percent shareholding in MARI.