The Abacus Prompt - March 2018 Issue

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Stock Market

  • KSE-100 index closed at 45,560 pts, up by 5.4% MoM. Graph March 18
  • Foreigners were net sellers during March18, but a reversal trend was observed in foreign participation in last ten days with foreigners buying equities worth USD 6.4mn post depreciation. Foreign interest was evident in sectors like Technology (inflow of USD 9.1mn), Cement (inflow of USD 5.1mn) and Oil & Gas exploration (inflow of USD 2.1mn).
  • Going forward the market is expected to continue a bullish momentum ahead of the budget FY19 (exp. May) with market anticipating positive development with relation to capital markets.
  • The average daily volume decreased significantly by 66.7% MoM to ~80mn shares.
  • The average daily volume increased significantly by 36.8% MoM to ~192 mn shares concentrated in mid and small tier stocks.
  • KSE 100 currently has a P/E multiple of 8.81, indicating the market is trading at a significant discount to regional economies.

Currency MarketsCurrency March 18

  • The PKR depreciated ~5% against USD. A widening current account deficit may only be plugged by a systematic devaluation of PKR going forward.
  • GBP had its best performance since mid-2015 against USD & Euro as it appreciated roughly 3.9% and 1.4% respectively due to a reduction in Brexit related risks & a Bank of England’s decision in delaying hike in interest rates to May18.
  • CNY appreciated significantly against PKR due to the rupee devaluation by SBP and the government is planning to secure a commercial loan of USD 1–1.5bn from Chinese banks to shore up depleting FX reserves.
  • SAR and AED both appreciated by 4.66% MoM matching increase of USD against PKR, with both currencies being pegged to the USD.

Commodity Markets

  • International gold prices declined due to increase in interest rates in US. However, locally gold & silver prices increased and this increase nearly matched the PKR depreciation against USD owing to the safe haven effect.
  • WTI crude oil prices rose during the month of March as global equity markets rallied and market participants weighed a rise in US crude inventories and production against continued OPEC supply curbs. Commodity March 18
  • Local prices of HSD & Motor Spirit reduced by ~2% matching the decrease in international prices during the month of February.
  • Total cement dispatches were recorded at 4.65mn tons in March, up by 23.0% MoM and 17.4% YoY. Local dispatches were 3.54mn tons, up 15.7% MoM and 16.1% YoY. Going forwards the production is expected to increase as leading cement manufacturers in southern Pakistan have received export orders from West Africa and Kenya.
  • Cotton prices increased by about 2.7% MoM due to consistent demand, as the supply shortage of quality cotton kept prices rigid.
  • Urea prices observed a slight increase of 0.5% MoM, Rising domestic production of the commodity limited trading activity in the international market.

News Highlights

  • ADB & GoP on Mar 21, 2018 signed a USD 260mn loan agreement to improve the power transmission network in Sindh & Baluchistan.
  • Pakistan’s FMCG segment is set to see fresh investment after Unilever Plc announced FDI of USD 120mn for expansion of its operation in the country for next 2 years.
  • GoP plans to announce an amnesty scheme in April anticipating that Pakistanis could repatriate up to USD 5bn under the scheme.
  • GoP has granted a security clearance to a proposed sale of K–Electric to Shanghai Electric Power Company.
  • Sadiq Sanjrani the independent candidate from Baluchistan has been elected as Senate Chairman on March12, 2018.