LAHORE - Pakistan Stock Exchange’s 100-share index continued to remain under pressure during the last week as investors waited for clarity on the outcome of JIT investigation. The index was down 3 percent as compared to a decline of 1% seen during the week ending Jun 22 (pre-Eid).
Investor’s sentiment was further dampened as Finance Ministry and State Bank of Pakistan were not on the same page as far as rupee depreciation is concerned. Pak rupee after depreciating by 3.5% in a single day to Rs108.3 reverted back to Rs105.5 against USD. Lack of investor interest is also evident from lackluster volumes/value, down 40%/39% to 166m shares/Rs9.2b ($88m).
Foreigners remained net sellers of $5.8m during the week as compared to buying of $9.2m last week (week ending June 22). Major buying was seen in cement sector ($5m) whereas selling was seen in oil & gas exploration ($6.2m) & banks ($3.3m).
As per news reports, Qatar's Prince Hamad Bin Jassim bin Jaber Al-Thani has answered the letter by the Joint Investigation Team (JIT) and the same will be presented before the team. Prince has also requested JIT to share the exact schedule of their visit to Qatar for further investigation.
High-level PML-N huddle decided to give befitting reply to political opponents. A high-level meeting of PML-N leadership, chaired by Prime Minister Nawaz Sharif, decided on Friday to give a befitting reply to their political opponents. The attendees of the meeting also decided to keep all development schemes on schedule despite the current political climate. The meeting discussed the ongoing political situation in the country, including the probe of the Panama case Joint Investigation Team (JIT) which will submit its report to the Supreme Court on Monday (today).
During the week, the federal government decided to appoint Tariq Bajwa as the new governor of the State Bank of Pakistan (SBP), bringing in an Islamabad insider in the central bank at a time when the country faces severe challenges on the external economic front. He has been given the responsibility of ensuring financial soundness of the banking sector as well as supporting the government’s economic reforms agenda.
During the week, PPL notified to PSX that OGRA has approved increase in wellhead price in respect of specification natural gas produced from Sui gas field being sold to GoP nominated buyers .The determined price is now equivalent to 55% of the natural gas price under the Petroleum Exploration & Production Policy,2012 and effective retroactively as of 1st June 2015.
Sazgar Engineering (SAZEW) in its material information sent to PSX disclosed its Jun 2017 sales which were down 41% whereas sales in FY17 increased by 20%. Experts reiterated ‘Buy’ stance on PAEL and downplay any concern of pressure on the company’s margins (70% of the company’s raw material is denominated in foreign currency) owing to recent Pakistani rupee devaluation against the Green back. To recall, Pakistani rupee on 5 Jul suffered its biggest one-day loss since 2008 (depreciating by 3.2% against the greenback) which took the market by surprise. Though the loss to some extent recovered the very next day, the govt has indicated that the rate will stay in the range of 105-107/US$ in the near future, depicting a depreciation of 1-2%.
As a result of this unexpected PKR move against US$, PAEL plunged 10% in 3 sessions vs KSE 100-index benchmark index decline of 0.3%.
Moreover, favorable dynamics of appliances and power division segments will enable the company to pass on any hike in its input costs from 4Q2017. Experts therefore reaffirm conviction on PAEL on the back of 1) strong growth in appliances segment thanks to consumers’ strong purchasing power, 2) power division which is favorably placed to gain from improving power generation of the country (energy shortfall of 4,000-5,000MW) and 3) attractive valuation.
They believe that the company’s appliances division (60-65% of total sales) will deliver strong performance in 2Q2017 owing to higher refrigerator and air conditioner sales as compared to sales in 1Q2017. To recall, during 1Q2017, company managed to sell the same level of air conditioner units that it achieved for the whole year in 2016, which was 31,000 units.
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