Lahore

The benchmark KSE-100 index has registered the increase of 1.1 percent over the week to close at 31,299 index level mainly due to recovery in international oil prices.

Tobacco, Construction & Materials and Oil & Gas were major gainers during the week, up 11.5 percent, 4.2 percent and 3.9 percent, respectively. Media and Pharma & Bio Tech were major losers as they declined 3.4 percent and 2.7 percent respectively.

According to experts, foreigners were net sellers of US$7 million in the outgoing week. Cement sector attracted the most attention with net buying of US$6.8 million. Major selling was seen in Banks and Electricity sector with net selling of $6.4 million and $2 million, respectively.

Average daily volume declined 21 percent to 116.8 million shares and average daily value declined 13 percent to Rs7 billion/US$66.6 million. On sector basis, Atlas Honda (ATLH) announced its 3QFY16 results today in which the company reported net income of Rs755 million (EPS Rs7.3), an increase of 21.4 percent YoY. Net sales of the company grew by 20.7 percent YoY to Rs14.2 billion in the outgoing quarter owing to robust motorcycle sales, which mainly drove bottom-line growth.

Crescent Steel & Allied Products (CSAP) announced its 2QFY16 result. The company reported consolidated profit after tax of Rs309 million (EPS Rs4.2), nearly a two fold increase from same period last year. Sales increased 155 percent YoY to Rs1.9 billion and gross margins improved 15.6ppts to 22.9 percent in outgoing quarter.

In the meeting of Economic Coordination Committee (ECC), it was decided that gas utility companies will finance Rs101 billion infrastructure projects through banks and fixed return on assets will be guaranteed on the created assets. Moreover, Rs3/unit reduction in power tariff for industrial consumers was also confirmed in the meeting.

Pakistan Investment Bonds (PIB) auction was held earlier this week in which cut-off yields declined by 25-52 basis points and Rs131.6 billion was accepted against target of Rs100 billion. Cut-off yields on 3-year PIBs stood at 6.5 percent (amount accepted Rs71.1 billion), 5-year at 7.55 percent (amount accepted Rs60.3 billion) and 10-year at 8.85 percent (amount accepted Rs163 million).

Chevron Pakistan, operating under its Caltex brand, has planned to spend Rs2 billion in Pakistan on a lubricant plant over next 3-4 years. According to statement from the company’s chairman, the plan is to expand its lube capacity to 75 million liters/annum from current 55 million liters/annum and to have total of 125-150 oil change facilities by 2017 from current 65 facilities.

According to experts, the National Fertilizer Development Centre (NFDC) released the fertilizer off-take numbers for the month Dec. Total urea off-take in the month witnessed a growth of 33 percentMoM/26 percent YoY to 828k tons, taking the cumulative CY15 sales to 5.6 million tons down 1 percent YoY. Growth in Dec 2015 Sales was driven by seasonal demand while lower prices further supported the off-take. DAP off-take declined by 75 percentMoM/40 percent YoY to 132k tons, where total CY15 sales clocked in at 1.8 million tons, up 7 percent YoY. Amongst fertilizer manufacturers, EFERT witnessed the highest increase in urea off-take in Dec’15 to 346k tons, up 72 percentMoM/88 percent YoY. FFC sale volumes also recovered on a YoY basis by 51 percent however, MoM growth clocked in at 6 percent. The fertilizer industry is currently going through a turbulent operating environment where the recent cut in urea prices has further aggravated the situation.

According to experts, on a sequential basis, inflation remained almost flattish MoM compared to -0.6 percent MoM in Dec 2015 and 1HFY16 average of 0.2 percent. Continued deflation in food basket by 0.9 percent during Jan’16 will likely offset the routine uptick of 1.0 percent in House Rent Index. Also, muted trend in transport basket owing to 3 percent downtick in diesel prices will further contain inflationary pressure in Jan 2016. Cumulatively, average CPI in 7MFY16 remained muted at 2.2 percent compared to 5.8 percent in the corresponding period last year. Sharp decline in global commodities’ prices and high base factor remained the major reasons behind soft inflationary pressure during the period under review. Jan 2016 CPI announcement narrowed down the real interest rate to 2.8 percent compared to 1HFY16 average of 4.1 percent. For full year FY 2016, experts foresee CPI to remain in the vicinity of 3.0 percent-3.1 percent. Rebound in oil prices leading to probable deterioration in external account (amid dwindling exports) and uptick in CPI will remain a risk to our base case policy rate assumption of 6.0 percent in CY 2016.