Elixir Securities Limited – Pakistan Weekly

Karachi, November 21, 2014 (PPI-OT): Market remains volatile

• KSE-100 index managed to gain 150 points (0.5% WoW) during the week marred by heightened volatility.

• Exuberance during the first half of the week, which was stimulated by SBP‘s decision to slash interest rates by 50bps, was cut short due to institutional selling in latter part of the week.

• LUCK led the resurgence and added 51.1 points to the index. However, anticipated NIM compression for banks in the backdrop of downturn in interest rate cycle kept the sector in check, with UBL in particular dragging the index by 63 points.

• Trading activity remained flat WoW with average daily turnover of 168mn, close to last weeks’ average.
• Foreigners remained net buyers during the week, buying 4.8mn worth of shares relative to USD 10mn last week.

Key news this week

• 50bps reduction: SBP cuts policy rate, albeit reluctantly

• Consortium of financial advisers approved for ABL

• Power sector receivables surge to Rs577bn

• ECC approves 30pc hike in gas tariff

This week’s top stories

• Economy: DR cut by 50 bps; a positive for equities: SBP slashed Discount rate (DR) by 50bps eyeing substantial slowdown in inflationary pressures in the backdrop of falling international commodity prices (particularly oil), lower administered prices, smooth food supplies and high base effect.

• Cements – Upgrade to Market weight on weak coal outlook: In the wake of increased environmental concerns and stricter regulations in the developed world and particularly in China, the global energy mix has been moving away from coal. As a result, international coal prices have stunted to a five year low of USD63/ton.

Future outlook

• Political noise prior to sit-ins in Islamabad and foreign flows shall likely guide investor sentiment next week.

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