The Abacus Prompt - May 2018 Issue

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Stock Market

  • The market ended at 42,546 pts in May 2018, a decrease of 5.8% MoM. The benchmark index was unable to sustain the rally as the market has been slow due to Ramzan. Moreover, the pressure on the external front, political uncertainty and interest rate hike failed to provide any material respite with growth concerns plaguing the index’s growth during the month.Graph-may18
  • Performance at the mainboard remained dismal with majority of the key sectors (Cements, Textile, Power, Oil and Gas, Autos) ending in red.
  • Foreigners were net sellers during the month (56.2mn shares offloaded)
  • Foreigners were net sellers during the month primarily on account of OGDC deal (35mn shares offloaded at PKR164/share).
  • The overall volumes decreased by 32.1% MoM to ~142.62 mn shares from 210 mn shares from April 2018.
  • KSE 100 currently has a P/E multiple of 8.15, indicating the market is trading at a significant discount to regional economies.

Currency Markets

  • The PKR landed almost flat against USD in the interbank market during the month, and was helped by traditionally strong inbound remittances during Ramazan.Currency-may18
  • EUR depreciated against PKR and USD due to political uncertainty in Italy and the economic slowdown since mid-April in Europe. GBP suffered losses during the month as BoE held rates and cut it economic growth projections.
  • CNY depreciated by nearly 103 bps against PKR closely following its decline against the Greenback.
  • SAR and AED depreciated by 0.01% and 0.03% respectively MoM matching increase of USD against PKR, with both currencies being pegged to the USD.

Commodity Markets

  • International gold prices declined due to the boosted expectations of another hike in the interest rate, lifting the dollar. Moreover, the appreciation of the USD against major currencies also explained the decline in gold prices.Commodity-may18
  • WTI Crude finished the month nearly 1.2% higher MoM, and was down to a constriction in crude oil supply. Supply side woes may be attributed to the US decision to exit the nuclear deal with Iran as well as Venezuela’s decision to cut down on production.
  • Local prices of HSD and Motor Spirit remained unchanged throughout the month. OGRA had suggested an increase of PKR 5.02 per litre in the prices of HSD and PKR 3.22 in petrol due to the price hike in international oil prices.
  • Total cement dispatches were recorded at 3.9mn tons in May, down by 8% MoM and up by 6% YoY. Of these local and export dispatches were 3.5mn tons (89%) and 0.4 mn tons (11%) respectively.
  • Cotton prices decreased by ~1.3% due to the supply of low standard cotton and the entire cotton belt having been affected by severe hot weather
  • Urea prices increased by ~1.8% due to higher demand, low production and increase in water shortage.

News Highlights

  • The PML N led government successfully completed its five-year tenure on May31, 2018 and the country is expected to go to polls in late July under a caretaker set-up.
  • A subsidy amounting to PKR 51 billion was approved for the power sector with an aim of boosting exports.
  • US imposed a 25% tariff on imports of steel, and 10% on aluminum on EU, Canada, and Mexico (which had previously been exempted from tariff hikes).
  • The federal cabinet approved the budget FY 2019 with an outlay of PKR5.237 trillion on May 19 including an amnesty scheme for declaration of wealth held by Pakistanis within and outside Pakistan.