Stock Review.

During the week ended on 14th February 2020, the benchmark index of Pakistan Stock Exchange (PSX) closed at 40,243 points, up 0.25%WoW as trading activity remained muted. Foreigners remained net sellers with US$11.15 million that was mainly absorbed by insurance companies and other organizations. Top performers of the week included MLCF, HUBC and HBL, while PAEL, KAPCO and GWLC remained the laggards. Major volume churners included UNITY, HASCOL, MLCF, BOP and DGKC. The week started with market witnessing a major sell-off, amid fears of global slowdown on coronavirus outbreak in China, which subsided, posting positive moves in subsequent session. Investors gained further confidence with the news of smooth progress in discussions with International Monetary Fund (IMF).

The week also witnessed yield on 12-month Treasury Bills increasing by 39bps in the latest auction and investors booking profits after the mid-week rally. Other major news flow during the week included:

1) Pakistan's trade deficit shrinking more than 28% to US$13.8 billion during 7MFY20 due to import compression, but exports remained under pressure for the third consecutive month,

2) Prime Minister Imran Khan assuring the export-oriented sectors that there will be no change in tariffs of electricity and gas for next three years,

3) Federal cabinet approving a comprehensive package under which Rs10 billion subsidy will be provided on essential items,

4) Pakistan's auto sector continuing to show dismal performance during 7MFY20 with cars sales plunging by 44%YoY, and 5) possibility of The Federal Board of Revenue (FBR) imposing a standard rate of 17% sales tax on certain items. With result season in full swing, near term market performance will largely be guided by earning surprises.

PSO, UBL, HBL and ENGRO are some of the major corporates scheduled to announce their earnings next week. From a macro perspective, the market will be keenly watching developments pertaining to the second IMF review.

The government has reported a fiscal deficit of 2.3% of GDP in 1HFY20 compared to a fiscal deficit of 2.7% of GDP in 1HFY19. Importantly, the primary balance during the period was reported at 0.7% of GDP, close to the target of 0.6% set by the IMF.

In the 2QFY20, the fiscal deficit came down to 1.6% of GDP as compared to fiscal deficit of 0.7% of GDP 1QFY20. All the four provinces recorded a budgetary surplus during the 1HFY20 and 2QFY20. During the 1HFY20, Total Revenues collection...