LAHORE -  Bearish sentiments continued to prevail at stock market throughout the week owing to major political developments. Where major push came from former PM’s defiant long march, which started on 9th Aug, while political stage set by Pakistan Awami Tehreek added to the fuel, keeping investors on the sidelines. The lackluster trading activity amid uncertain political climate, took the index down by 3.4 percent to close at 45,289; while participation dropped by 42 percent and 46 percent in terms of ADTV and ADTO respectively. Major drag this week came from financials (-5 percent) followed by oil and gas (-3 percent). On macro front, development on the data released has not been positive where trade deficit of the country widened by 56 percent YoY to USD3.2b in July as the pace of growth in export could not be matched with imports. Remittances declined by 19 percent MoM to USD1.54b reflecting higher receipts last month on account of Eid, though were up 16 percent YoY. Additionally, foreign exchange reserve have fallen to USD20b reflecting a dip of USD1.8b within a month.

Foreigner’s offloaded shares worth USD31.16m this week, where major selling pressure was observed in cement (USD4.3m) followed by commercial banks (USD6.7m) sector. Some respire came from textile sector with net buying of shares worth USD.44m.

In other news, massive recovery of 25 percent MoM was witnessed in auto sales in Jul’17 mainly due to a low base where volumes tend to be sluggish in June. On an individual level, Honda Atlas Car Limited (HCAR) introduced a new variant of City Basic Grade in the 1.5L segment and a face-lift version of City Aspire 1.5L. However, automobile sector closed the week lower (down 3 percent WoW) possibly led by negative sentiments due to recent JPY strength. Additionally, Kot Addu Power (KAPCO) announced its intention to bid for 17.37 percent stake in HUBCO that are being offered by Dawood Hercules Corporation and some other shareholders. Most of the earnings announcements this week fell below consensus.

Experts said that the KSE 100-index shed 3.4 percent/1,589pts in the outgoing week to close at the 45,288-point level. Participation thinned significantly as average volumes fell 46 percent WoW to 190mn.sh while traded value declined 42 percent to Rs9.6b/$92m. After bouncing 2.1 percent last week investors sought to book gains as the political theater draws masses again – Ousted Tiger Nawaz Sharif & his PML-N crew careen down the Grand Trunk Road, taking every pit stop as an opportunity to criticize those who ‘dealt’ in his disqualification.

Results were mixed; market caught wind of PAEL’s poor earnings well before as evident by 11 percent correction in 5 sessions preceding announcement. PSO rallied 5 percent WoW due to stellar full year earnings growth of 77 percent & bumper cash (Rs15) & stock (20 percent) payout.

EFOODS tanked 12 percent with a dismal 2Q LPS of Rs0.19; earlier in print the MD highlighted tax changes significantly hampered sales.

Sector wise; engineering shed 7 percent WoW, fert (-5 percent), cement (-4 percent), power (-4 percent), E&P (-3 percent), banks (-3 percent), auto (-3 percent) & OMC (-2 percent).

Insurance co’s (+US$7.4m) were the largest domestic buyers, while foreigners sold $31.2m during the week vs selling $13.2m last week; selling was concentrated in OMC ($8.5m), banks ($6.7m), E&P ($6.3m) & cement ($4.3m).

During the week, WB linked loans to liberal foreign exchange policy: “Due to deteriorating macroeconomic conditions of Pakistan, the lending agency cannot extend policy loans for budgetary and balance of payments support at this time”.

Cotton Commissioner Dr Khalid Abdullah apprised meeting participants that the crop was planned to be planted over 3.11 million hectares (7.68 million acres) with production target at 14.04 million bales. However, sowing stood 13 percent lower as 2.753 million hectares (6.803 million acres) were cultivated during the current season. It is expected to produce 12.6 million bales against the target of 14.04 million. Though the output will fall short of the goal, it will be significantly higher than last year’s production of 10.7 million bales. The fertiliser industry has expressed its reservations about a clause in the recent subsidy notification that requires every fertiliser dealer to show its national tax number (NTN) before benefitting from the offer. “The government must consider the fact that majority, estimated at over 90 percent, of the smaller dealers are not registered and do not have NTNs, hence, they will not be able to pass on subsidy benefits to the farmers,” they complained. Al-Ghazi Tractors (AGTL) furnished 2Q2017 EPS of Rs11.6, up 30 percent YoY taking 1H2017 EPS to Rs27.5, up 62 percent YoY. AGTL declared dividend of Rs25/sh. Pakistan Cables (PCAL) reported FY17 EPS of Rs16.8, up 82 percent YoY. PCAL declared final dividend of Rs2.0/sh taking full year payout to Rs10.5/sh .

Flat steel manufacturers ISL & ASL raised prices by Rs3,000/ton. They have raised prices by Rs7,000 FYTD amid surging int’l prices (HRC +17 percent FYTD).

Experts do not expect market to pick up its pace in the coming week and anticipate investors to remain cautious as foreign investors have been net sellers throughout the week , while local players have been net buyers but their quantum has not been able to pull the market in the green zone. They believe development on political front and earnings announcement will be the key trigger for market direction, where any positive surprise in earnings announcement will likely cause bulls to provide the much needed support to the index. SHEL, HUBC and ENGRO are one of the few names that are scheduled to announce their results next week.

 

OUR STAFF REPORTER