Weekly Review: equity market to move with mini-budget announcement

Weekly Review: equity market to move with mini-budget announcement

Weekly Review: The equity market in Pakistan is poised for significant movement in the coming week, primarily revolving around key developments, including the presentation of a mini-budget on January 23, 2019.

These events are expected to shape the trajectory of the Pakistan Stock Exchange (PSX) and influence investor sentiment.

The Pakistani government is preparing to unveil another mini-budget for the fiscal year 2018/2019, and this announcement is set to be a focal point for investors and market participants in the week ahead. The PSX anticipates that market trends will closely follow developments associated with this mini-budget, which will have a notable impact on various sectors of the economy.

Furthermore, Prime Minister Imran Khan has been actively engaged in diplomacy, strengthening Pakistan’s relations with friendly nations such as Qatar. The Prime Minister’s international visits and the reception of foreign dignitaries are geared towards enhancing diplomatic ties and bolstering the nation’s foreign exchange reserves. Any positive outcomes from these interactions will likely stimulate market activity, according to analysts at Arif Habib Limited.

Reflecting on the past week, the KSE-100 index displayed a positive trend, closing in the green on three out of five trading sessions and ending at 39,306 points, marking a 0.66 percent week-on-week (WoW) increase.

The news flow regarding the upcoming mini-budget has significantly influenced sentiments within the domestic equity market. Stockbrokers have expressed optimism, particularly in light of the expected abolition of the 0.02 percent advance tax, tax exemption for dividends on stocks held for over three years, and the proposed extension of the loss carry-forward period to three years.

Several sectors made positive contributions to the index during the week. Notable among these were the fertilizer sector, primarily driven by expectations of resolving the Gas Infrastructure Development Cess (GIDC) issue, and the oil and gas exploration companies sector, which was buoyed by the potential for a hydrocarbon discovery at an offshore location by industry giants such as Exxon, ENI, OGDC, and PPL. Additionally, the tobacco, power generation and distribution, and technology and communication sectors also made positive contributions to the index.

On the flip side, sectors such as cement faced pressure due to the anticipation of higher Federal Excise Duty (FED) to be imposed in the upcoming budget. The automobile parts and accessories sector, along with refineries, also experienced negative trends.

Scrip-wise, the top contributors to the index included Pakistan Petroleum Limited (PPL) with 74 points, Fauji Fertilizer Company (FFC) with 65 points, Engro Corporation (ENGRO) with 40 points, Oil and Gas Development Company (OGDC) with 38 points, and Pakistan Tobacco Company (PAKT) with 25 points.

Foreign selling persisted during the week, amounting to USD 9.4 million, in contrast to a net buy of USD 0.6 million in the previous week. Selling was observed in various sectors, including exploration and production. On the domestic front, major buying was reported by individuals, totaling USD 7.3 million, and mutual funds, with USD 3.72 million.

Trading volumes during the week settled at 118 million shares, representing a 15 percent WoW decline, while the value traded amounted to USD 40 million, reflecting a 14 percent WoW decrease.

As the nation awaits the unveiling of the mini-budget and with ongoing international engagements of Prime Minister Imran Khan, the Pakistan Stock Exchange is likely to remain a focal point for investors and market observers, with its performance closely tied to these significant developments in the coming week.