LAHORE - Investors interest at the local bourse this week was stimulated by both company specific and macro events. Highlights of the week included: 1) Fed’s decision to launch a third aggressive stimulus programme to rescue the US economy; 2) 0.44 per cent YoY decline reported in 2MFY13 Pakistan’s trade deficit figures; 3) 150bps cut in export finance scheme rates by SBP; 4) government issuance of Rs82 billion Privately Placed Term Finance Certificates (PPTFCs) to OGDC to reduce circular debt; and 5) Moody’s continued negative outlook on Pakistani banks. Consequently, the KSE-100 index gained 196 points during the week to close at the 15,450 level, up 1.3 per cent WoW with average daily volume of 164m shares. Foreign interest was intact as foreigners were net buyers of $2.7m.

SBP slashed export finance scheme rates by 150bps to provide some relief to export oriented sectors. This bodes well for the textile sector, where we hiked FY13 EPS for NCL by 12 per cent and NML by 3 per cent. NML and NCL this week outperformed the market by 6.0 per cent and 3.7 per cent, respectively.

During the week, the govt issued Rs82 billion PPTFC through Power Holding Private Limited (PHPL) to OGDC. The scheme effectively transfers OGDC’s overdue receivables into investments backed by the govt. It is a makeshift arrangement to provide some respite to the energy chain from the circular debt issue. OGDC and PSO, the major beneficiaries of this cash-neutral transaction recorded a weekly gain of 4.8 per cent and 1.2 per cent, respectively.

Moody’s Investor Service maintained negative outlook on Pakistan’s banking system mainly due to heavy placement in govt owned securities. Resultantly, the banking sector underperformed the market by 2.0 per cent WoW.

Though industry is still awaiting the official notification, reports suggest that gas cess on Industrial and Captive Power has been halved to Rs 50 per bag. This relief should bring total fuel stock costs down to Rs510/mmbtu from Rs560/mmbtu previously, having a meager impact of Rs12-15 per bag of urea. Experts believe fertilizer players would not pass on this impact due to already shrinking margins, realising a minor upside to their bottom lines. Cements, textile and chemical sectors will also reap the benefit of the recent downward revision in cess amount. Among our universe, the reduction in cess amount on captive power plants will result in nominal upside of ~3 per cent to earnings of DGKC and LUCK.

The decision will also bode well for LOTPTA’s recently commissioned captive power plant thus providing further support to core operation margins. Given uncertainty surrounding gas supplies to NML and increased use of furnace oil/alternate fuels by the company, we expect the decision to have a nominal impact on NML. However, the recent decision will certainly improve the competitiveness of Pakistan’s textile sector in international arena.

On the last day of the week, the KSE100 extended gains from the previous session to close up another 28.03 points or 0.18 per cent to 15,306.51. Market turnover remained lackluster and declined to 86.297 million shares against 125.394 million shares traded in the previous session.

Increase in global equity markets and commodity prices after the US Fed announcement of QE3 near the weekend helped local bourse to close 1.5 per cent up on weekly basis. However investors remained skeptical amid rising leverage positions and NRO hearing next week subsequently volumes declined by 16 per cent. While low activity was witnessed in Attock group as well whose board meetings are scheduled over the weekend.

Heavy weight OGDC and telecom sector remained in the limelight with OGDC gained 5 per cent on WoW. After official announcement of ICH (International Clearing House), formation kept telecom sector in investors’ radar.