KARACHI: Pakistan stock exchange (PSX) benchmark KSE-100 index displayed a positive trend during the week ended January 18, 2019, closing in green on three out of the five trading sessions and ending at 39,306 points up 0.66 percent.
“News flow regarding the upcoming mini-budget aided sentiments at the domestic equity bourse with suggestions by stock brokers being particularly encouraging; abolishment of 0.02 percent advance tax, exemption of tax on dividends for stocks held over three years and losses to be carried forward for up to three years,” a report issued by Arif Habib Limited said.
Volumes remained lower than the previous week for a large part, averaging 118 million shares/day, while average daily traded value depicted a similar trend, ending down 14 percent.
Foreign selling continued this week clocking-in at $9.4 million compared to a net buy of $0.6 million last week.
During the week, outperforming sectors included Fertilizer (up 2.1 percent), E&Ps (up 1.3 percent), and Automobile Assemblers (up 1.6 percent). “Anticipation of new discoveries by Exxon Mobil in Indus Block resulted in Pakistan Petroleum Limited (PPL) (up 3.6 percent) and Oil & Gas Development Company (OGDC) (up 1.9 percent) closing the week in positive territory, given their stake in the joint venture,” Ahmed Lakhani at JS Global Capital said.
Meanwhile, Honda Cars (HCAR) (up 22 percent) and Pak Suzuki (PSMC) ( up 6.4 percent) of the auto sector were two of the best market performers during the week, despite lackluster volumetric growth in monthly car sales, which was likely due to rumors of new measures to be taken in the upcoming reform package to restrict the import of used cars.
During the week, with an aim to support export oriented sectors, Economic Coordination Committee (ECC) decided to clear the outstanding claims worth Rs36 billion and allowed duty-free import of cotton . Furthermore, ECC decided that vehicles can only be imported if the duties and taxes are paid in foreign currency by Pakistani nationals.
Also, the incumbent government is planning to standardize sales tax at 17 percent on petroleum products along with imposing FED on cements, beverages, cigarettes, and vehicles. Furthermore, farmers’ body demanded to waive off GST on locally manufactured tractors owing to declining affordability in the country.
Additionally, US-based company Cargill, showed its intention to invest $200 million in Pakistan over the next 3 – 5 years. Moreover, as per the State Bank of Pakistan (SBP), large scale manufacturing (LSM) posted a decline of 1.0 percent during July-November 2018 due to dismal performance in pharmaceuticals, petroleum, steel, and electronics sectors.
A state-run Russian firm has also showed its intention to invest $2.0 billion in Pakistan’s water and power sector projects.
On the macro front, foreign exchange reserves of the country dropped by $148 million to $13.5 billion owing to debt repayment. Furthermore, the incumbent government has decided to shelve a major power project of 1,320 MW under CPEC owing to excess production capacity now anticipated in the country. Also, Pakistan is seeking a downward revision in RLNG price from Qatar and hopes to receive a credit facility for gas imports to get a cushion for current account burden.
“The incumbent government will unveil the ‘Reform Package’ on January 23, 2019 with an aim to bring economic reforms in the country and to curtail balance of payment crises coupled with bridging revenue shortfall by imposing different duties and taxes. Resultantly investors will closely track developments regarding new tax measures, however, any negative policy will dampen investor sentiments and market performance,” a report issued by BIPL Securities noted.