Stock market at a glance.

Market Review

The outgoing week remained volatile where benchmark index closed flat at 39,307pts, exhibiting an increase of 130pts. Market participation remained dull during the week as evident from decline in ADT and ADTV by 14.9%WoW and 13.6%WoW, respectively. Foreign investors were net sellers, exhibiting an outflow of USD9.4mn. During the week, with an aim to support export oriented sectors, ECC decided to clear the outstanding claims worth PKR36bn 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% 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 USD200mn in Pakistan over the next 3-5yrs. Moreover, as per the SBP, LSM posted a decline of 1%YoY during 5MFY19 due to dismal performance in pharmaceuticals, petroleum, steel, and electronics sectors.

A state-run Russian firm has also showed its intention to invest USD2.0bn in Pakistan's water and power sector projects. On the macro front, foreign exchange reserves of the country dropped by USD148mn to USD13.5bn owing to debt repayment. During the 1HFY19, as per PBS, exports and FDI witnessed an increase of 2.2%YoY to USD11.0bn and 19.2%YoY to USD1.3bn, respectively, while imports declined by 3.0%YoY to USD28.0bn. CAD narrowed by 4.4%YoY to USD8.0bn during the 1HFY19. Furthermore, the incumbent government has decided to shelve a major power project of 1,320MW 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 CAD burden.

Outlook

The incumbent government will unveil the 'Reform Package' on 23-Jan-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.

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