KARACHI: Pakistan Stock Exchange (PSX) benchmark KSE-100 index gained 4.0 percent or 1,502 points closing the week ended January 11, 2019 at 39,049 points, as $3.0 billion support package was agreed with the United Arab Emirates (UAE), while the Financial Action Task Force (FATF) expressed a degree of satisfaction over Pakistan’s efforts.
The week commenced on a positive note and gained over 1,000 points on Monday as the crown prince of United Arab Emirates (UAE) announced a financial support package of $3.0 billion as well as further plans to provide a 3.0 billion oil facility. Furthermore, Financial Action Task Force (FATF) expressed encouraging remarks over Pakistan’s efforts to control money lauding and terror financing which fueled investor’s sentiment, notes a report issued by Arif Habib Limited.
On the other hand, rising international oil prices and enticing valuations attracted market participants to build positions in the exploration and production (E&P) sector.
Market participation increased throughout the week as evident from increase in average daily volume average daily value of traded shares by 26 percent and 28 percent, respectively. Foreign investors were net buyers, exhibiting an inflow of $0.6 million.
During the outgoing week, Pakistan Auto Manufacturers Association (PAMA) released automobile data wherein auto sales fell by 3.0 percent to 120,000 units in six months (July-December 2018) on the back of restriction on the purchase of vehicles by non-filers.
On the flip side as per the latest All Pakistan Cement Manufacturers Association (APCMA) report, cement sales during December 2018 exhibited an increase of 4.0 percent, where 81 percent increase in exports offset the decline in local dispatches.
Additionally, power division issued a notification for supply of electricity to zero-rated industrial sectors at USC7.5/kwh. Furthermore, the government notified an immediate ban on the import of furnace oil and ordered all refineries to upgrade their refining facilities.
Moreover, Drug Regulatory Authority of Pakistan (DRAP) approved an increase in price of medicines by 9.0 percent and life-saving drugs by 15 percent across the country. On the macro front, foreign exchange reserves of SBP dropped by $239 million to $7.0 billion owing to debt repayment. Trade deficit narrowed by 5.8 percent to $16.9 billion during the six months as exports inched up 1.7 percent, while imports eased 3.0 percent.
During the same period, remittances swelled by 10 percent to $10.7 billion over the corresponding period last year, continuing to give relief to ailing balance of payment position afflicted by swelling imports and debt payments, says an analyst at BIPL Securities.
International credit ratings company, Moody’s expressed doubts regarding Pakistan’s debt repayment outlook given low foreign exchange reserves and increasing gross borrowing requirements.
Going forward, analysts expect the market to remain positive given some material positive events are expected to take place including Saudi energy minister’s visit to Pakistan and expectation to establish largest oil refinery in Pakistan. In addition, fulfillment of commitments made by Prime Minister Imran Khan to the members of stock exchange during his visit regarding abolition of advance tax and allowance of capital losses to be carried forward will lift investor sentiment.