Activity at the bourse remained largely lacklustre ahead of the Monetary Policy Statement on the weekend, where the State Bank of Pakistan (SBP) cut the policy rate by another 100bps. At the same time, rumours of hike in Capital Gain Tax (CGT) in the Federal Budget (due on June 5th) and approval of the controversial GIDC Bill by the National Assembly and the Senate further dampened market sentiments. Resultantly, the benchmark KSE-100 index closed down 1.5 per cent WoW lower at 32,606 with trading volumes dropping to 9 month low of 75mn shares (-43 per cent WoW). Encouragingly though, foreigners remained net buyers of US$3.4mn vs. net buying of US$6mn in the preceding week.

Other key highlights of the week were: (1) GDP growth in FY15 expected to miss government’s start-of-the-year target of 5.1 per cent by 1 per cent, (2) LSM expanding by 2.49 per cent YoY in 9MFY15, (3) Rs149 billion out of Rs580 billion PSDP funds expected to be allocated for construction of motorways and bridges, (4) Oil imports declining by 19.4 per cent YoY in 10MFY15, (5) Government and Etisalat may potentially resolve dispute over remaining Pakistan Telecom’s (PTC) privatization proceeds and (6) APCMA demanding anti-dumping duty on Iranian cement.

During the week, the Parliament passed the Gas Infrastructure Development Cess Ordinance, 2015 yesterday, with few amendments, to validate the changes made in the cess structure under the GIDC ordinance, 2014. In this regard, the government has approved the law wherein any amount received or accrued but not yet received under the GIDC shall be collected with retrospect from gas consumers, expect for Industrial consumers (barring Fuel stock on Fertilizers). Furthermore, the rates have been kept consistent with the GIDC Ordinance, 2014 expect for a decrease in Industrial consumer tariff by PKR50/mmbtu to PKR100/mmbtu. Earnings of the companies already recording GIDC will have no direct impact; however, the payment of the accumulated GIDC will result in cash outflow, lowering other income of the companies. Though the imposition of GIDC is a sentiment dampener, however, most of the companies have already been recording GIDC expect for LUCK and MLCF in Cement and GATM in Textiles. Thus, the ordinance is not expected to have a material impact on the market.

Last week, Pakistan Bureau of Statistics has reported export numbers for Apr’15, where exports of textile goods have witnessed a slight increase of 2 per cent YoY to USD1.08 billion. Value added textile segment managed to post an impressive expansion of 11 per cent YoY to USD607mn, which is attributable to 1) 4 per cent YoY PKR depreciation and 2) enhanced market access in EU region. On the flip side, basic textile segment continued its poor run and shrank by 9 per cent YoY to USD341mn, led by 8 per cent decline in cotton yarn exports.

Similarly, on a sequential basis, textile exports displayed an encouraging growth of 5 per cent where the value added segment grew by 10 per cent while Basic textiles exports segment declined by a milder 3 per cent. Cumulatively, in 10MFY15, textile exports dropped by 1 per cent YoY to USD11.3 billion. Although, value added textile exports grew by 5 per cent to USD6.1 billion, sharp 10 per cent decline in basic textile exports to USD3.8 billion has more than offset the increase of value added segment. Readymade garments continued to be the stand outperformer in terms of export performance, which highlights the product category’s bright prospects.