Soft stance on ‘in-house financing’ provides relief to investors

Lahore -  The softening of stance of the apex regulator on the in-house financing provided a much needed relief to investors this week.

The improved sentiment was quite evident and drove the benchmark KSE-100 index 1.3 percent WoW.

During the week, the index gained 704 points on Thursday, the highest daily move in CY17.

Despite improved sentiments, both volumes traded and value traded failed to show any improvement and slipped respectively 1.6 percent and 2.6 percent WoW.

Gas distribution, technology and engineering were the major gainers during the week, whereas health care, consumers and electric goods sector were among major losers.

The Foreign Institution Portfolio Investment (FIPI) recorder net outflow of $32.7 million compared to net outflow of $4.8 million last week.

The outflow in FIPI has weighed on liquidity. Fertilizer attracted major interest with net buying of $1.5 million worth of shares, followed by consumers with net buying of $0.47 million.

On the local front, companies and banks were the net buyers of $21 million and $13 million, respectively.

Though the noise on in-house leverage financing has subsided, another major factor i.e. pronouncement of judgment on Panama leaks, is still pending.

As a result as the season has almost come to an end, investors’ focus is likely to remain on the potential decision in Panama case.

Barring any stock specific activity, we don’t see any major move in the index. We believe volumes are likely to remain low. Transfer of proceeds of divestment of 40 percent stake in Pakistan Stock Exchange may start from next week and could prove to be liquidity event at a modest scale for the market in coming days.

Experts said that the outgoing week put Bulls back in KSE-100’s driving seat (+1.3 percent WoW), dredging through the end of the month alleviated mounting pressure from debit balances.

As talks progressed on a new margin product, sentiment and participation improved with the regulator further assuring that its intent is to safeguard investors while improving transparency, functionality and liquidity.

On the sector front, Refineries gained 7% WoW as ATRL (+9.6%) rallied on the back of commencement of EURO-II diesel supply to OMC’s, while Engineering (+3%) was supported by CSAP (+13.7%) in hopes of further line-pipe contracts.

On the flipside, Foods declined 2 percent as heavyweight NESTLE shed 4.7% WoW, while some profit taking was witnessed in Cements (-1%).

Foreigners were net sellers of $32.7 million during the week as against selling of $4.8 million during the previous week. Major buying was seen in the oil & gas exploration sector whereas major selling was seen in the cement sector.

Habib Bank (HBL) notified the stock exchange regarding the reduction in authorised capital of the bank from Rs30 billion to Rs29 billion by cancellation of 100 million ordinary shares.

The management cited that according to the Banking Companies Ordinance, 1962, paid-up capital of the bank should not be less than 50 percent of its authorized capital.

ICI Pakistan (ICI) notified the PSX regarding board of directors’ approval on acquiring manufacturing facilities of WYETH along with acquisition of Wyeth’s products & registrations and some of Pfizer’s products as well.

Standard Chartered Bank (SCBPL) posted 2016 EPS of Rs2.48 (+3 percent YoY) along with a final cash dividend of Rs1.25/, in addition to Rs0.75/ paid earlier.

Growth in earnings mainly stemmed from non-interest income (capital gains), along with reversal in loan provisioning.

Dynea Pakistan (DYNO) notified the bourse regarding the conceptual approval of their expansion plans.

They aim to take their Formaldehyde plant from 59,000 metric tons capacity to 109,000 metric tons, subject to arrangement of long term financing. Total estimated cost of the project would be Rs510mn.

Sui Northern Gas Pipelines (SNGP) approved project of LNG pipeline, estimated cost Rs111bn with expected completion by Oct’18. This will be the 2nd LNG pipeline from Karachi to Lahore and will be used to transport additional 1200mmcfd of RLNG to bridge the gas shortfall. SNGP will be constructing the portion of pipeline from Sawan to Lahore, pipeline will be 42 diameter spanning 780km with infrastructure of 87000HP compression.

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