KARACHI: Hike in key interest rates by 50bps, increase in fuel prices by PKR6/liter and higher than expected inflation of 9.4% for March 2019 dented the sentiments of market participants. Resultantly, Pakistan Stock Exchange (PSX) benchmark KSE-100 index closed 2.92% down at 37,522 points for the week ended April 5, 2019.
“Market activity remained depressed on the back of increase in policy rate augmenting pressure on leveraged industries, higher than expected inflationary readings, continuous depreciation of PKR against the Green back, delay in finalization of the IMF program which is now expected by May, and projected slowdown by the Asian Development Bank of Pakistan’s GDP to 3.9%,” a report issued by Arif Habib Limited said.
Market participation remained dull during the week as evident from decrease in average daily turnover (ADT) and average daily trading volume (ADTV) that decreased by 7.5% and 20.4%, respectively. Foreign investors were net sellers, exhibiting an outflow of USD 3.7 million.
During the week, as per the latest numbers released by APCMA, cement dispatches decreased by 7% in March 2019 to 4.3 million tons vs 4.7 million tons SPLY in the back drop of lower PSDP allocation.
Moreover, Pak Suzuki Motor company (PSMC) and Honda Cars (HCAR) raised prices of different variants in the range of PKR 10,000-PKR 100,000 to pass on the impact of rising costs. Also, PSMC is likely to commence production of Alto in the coming week to replace iconic Mehran.
Additionally, the incumbent government is considering to withdraw the recently imposed 10% FED on the locally manufactured vehicles of 1700cc and above. Furthermore, the government approved import of 100,000 tons urea to avert shortfall of fertilizer in the country for summer crops. Also, Hub Power Company (HUBCO) will be raising PKR 7.0 billion through right issue with an aim to increase its stake in 1,320MW coal-fired power project.
On the macro front, foreign exchange reserves held by the country increased to USD 17.40 billion from USD 15.47 billion a week earlier due to inflows from China. Additionally, the government is mulling to introduce an amnesty scheme as an opportunity for non-filers to whiten their undeclared assets where the Federal Board of Revenue (FBR) eyeing to generate PKR 300 billion revenue from the proposed scheme.
Reportedly, approval of IMF’s bailout package to the country is contingent on the acquisition of clearance title from Financial Action Task Force (FATF).
“With the initiation of result season, we expect fundamentals to take the front seat and earnings surprises of individual companies would dictate the direction of market. Additionally, continued PKR slippage would keep the bourse’s performance under pressure,” an analyst at BIPL Securities said.[the_ad id=”31605″]