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KSE-100 index posted a six year high return of 14.9pc MoM

Karachi, December 2, 2019: The benchmark KSE-100 index posted a six year high return of 14.9 percent MoM in Nov’19, subsequent to May’13 (15.0 percent), portraying a jump of 5,084 points (USD based return of 15.2 percent MoM). With this, CY19TD and FY20TD return clocked-in at 5.9 percent (USD -5.2 percent) and 15.9 percent (USD +19.5 percent), respectively.

Primary reasons behind the robust rally can be cited as i) headways on the economic front with noteworthy improvement witnessed on the external account (CAD turned positive post a period of 49 months), ii) unchanged discount rate in the latest MPS despite uptick in inflationary readings (temporary in nature as per SBP), extending chances of a rate cut in the near future, and iii) foreign inflows in T-Bills crossing the USD 1 billion mark in FYTD stimulating from attractive yields and stability in the PKR-USD parity.

Although some profit-taking was witnessed during the month, the rally remained striking as order was restored in the political climate with the opposition party – JUIF – calling-off the sit-in in the capital and the SC granting a six month extension in the COAS’s tenure to legislate appointment for a period of 3 years. Moreover, while some market participants feared a rate hike to contain uptick in CPI with rise in perishable food items’ prices, status quo outcome of the MPS alleviated concerns.

On the economic front, Current Account Balance (CAB) arrived at a positive USD 99 million, last positive Current Account Balance was witnessed during Sep’15 (USD 121 million). This was led by 21 percent YoY decline in total imports along with 10 percent YoY rise in total exports.

Trade deficit went down by 47 percent YoY to USD 1.6 billion compared with USD 3.0 billion during Oct’18. During 4MFY20, Current Account Deficit (CAD) went down by 74 percent YoY to USD 1,474 million. Again, thanks to trade deficit which went down by 37 percent YoY to USD 7.8 billion compared with USD 12.4 billion during same period last year.

Remittances by overseas Pakistanis registered a decline of 3 percent YoY to USD 2,001 million during Oct’19 compared to USD 2,060 million during Oct’18. The country wise data reveals that inflows from KSA, UAE, USA and UK amounted to USD 468 million (-5 percent YoY, +11 percent MoM), USD 399 million (-5 percent YoY, +10 percent MoM), USD 322 million (-1 percent YoY, +14 percent MoM) and USD 329 million (+2 percent YoY, +24 percent MoM), respectively. During 4MFY20, remittances went down by 2 percent YoY to USD 7,479 million compared with USD 7,618 million during 4MFY19.

Foreign Direct Investment (FDI) during Oct’19 settled at USD 108mn compared to net outflow of USD 367mn during Oct’18. During 4MFY20, FDI has witnessed an increase of 239% YoY to USD 650mn. During 4MFY20, major investment poured in the Telecommunications sector (USD 267mn) followed by Electrical Machinery (USD 72mn) and Oil & Gas Explorations (USD 41mn).

Latest data released by PBS suggests that Large Scale Manufacturing Industries (LSMI) output witnessed a decrease of 5.6 percent YoY during Sep’19. However, on MoM basis, it went up by 1.9 percent. The decline was triggered by: Automobiles (-42.0 percent YoY), Wood Products (-37.9 percent YoY), Electronics (-21.5 percent YoY) and Iron & Steel Products (-18.0 percent YoY) official data disclosed.

However, the highest weighted sector textile (Weight: 21 percent) witnessed an increase of 0.1 percent YoY during Sep19. During 1QFY20, LSMI output witnessed a decline of 5.9 percent YoY.

Other major news includes: SBP reserves jump $240 million to $8.68 billion, Power tariff raised to meet IMF target, Foreign inflows in T-bills cross USD 1 billion, SC seeks details of collection, utilization of GIDC, Discount rate left unchanged at 13.25 percent, Circular debt reduction plan submitted to ECC, No relaxation, no waivers as IMF concludes review, IMF allows Pakistan to issue fresh sovereign guarantees of PKR 250 billion, Car sales dip by 44 percent, Pakistan settles Soviet-era trade dispute with Russia, October CPI inflation up 11.04 percent YoY, and Fitch lauds improvements in business climate.

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