The domestic equity bourse underwent a
decline of 2,266 points in Aug’19, trans
lating into a negative return of 7.1% and 5.5% in USD terms; this is the worst-performing month of CY19 taking CYTD return to -19.9% (USD based -29.1%). Major reasons behind this subdued performance was heightened tension at the eastern border, news flow regarding a meeting of FATF’s regional subgroup Asia Pacific Group (APG) in Canberra and the potential divestment of state-owned companies by the government.
Market activity commenced on a negative note in Aug’19 in anticipation of weaker result season for cyclical sectors. Major wreckage came in the second week of Aug’19 when India revoked the special status of Kashmir which led towards heightened tension at the eastern border. Albeit, the market showed strong recovery in the third week as enticing valuations uplifted the investor sentiment. However, with a meeting of FATF’s regional subgroup APG concluding in Canberra, Australia, the local bourse felt some pressure as Pakistan was placed on enhanced monitoring.
Index decline further gained momentum by news flow indicating divestment of state-owned entities including OGDC, PPL, and KAPCO by the government. On the economic front, Current Account Deficit (CAD) during Jul’19 witnessed a decline of 73% YoY to USD 579mn from USD 2,130mn in Jul’18. During the month, the downturn in CAD was witnessed due to 23% YoY (USD 1,466mn) decline in imports and 9% YoY (USD 216mn) YoY rise in exports.
Trade deficit went down by 42.0% YoY to USD 2.3bn compared with USD 4.0bn in Jul’18. Remittances by overseas Pakistanis registered an increase of 3% YoY to USD 2,039mn during Jul’19 compared to USD 1,982mn during Jul’18. The country wise data reveals that inflows from KSA, UK, UAE and USA amounted to USD 471mn (+8% YoY, +41% MoM), USD 299mn (0% YoY, +11% MoM), USD 427mn (-4% YoY, +20% MoM) and USD 332mn (+14% YoY, +20% MoM), respectively. Foreign direct investment (FDI) during Jun’19 decreased by 58% YoY (-43% MoM) to USD 130mn vis-à-vis USD 310mn in Jun’18. During FY19, FDI displayed a decline of 50% YoY to USD 1,737mn. The latest data released by PBS suggests that large scale manufacturing (LSM) witnessed a decrease of 5.0% YoY in Jun’19.
This took FY19 LSM growth to -3.6% YoY over the same period last year. Top three best performing sectors during FY19 were: Electronics (+0.44% YoY), Fertilizer (+0.38% YoY) and Leather Products (+0.03% YoY), official data disclosed. However, the highest weighted sector textile (weight: 21%) witnessed a decline of 0.05% YoY in FY19. Other major news: Inflation hits 68 months high of 10.3% in July, Imported cotton: Duty, ST to be re-imposed, Economy likely to grow below 4%: ADB, World Bank president to visit Pakistan in first week of Nov, 1320MW coal-fired Hub power plant commissioned, sales tax refunds for exporters to be paid within 72 hours, claims FBR, Rs 579 billion worth projects approved by ECNEC, Government levies 3pc regulatory duty on cotton import, and Royal Vopak to invest USD 1.5 billion in the land-based LNG terminal facility. Average volumes during Aug’19 surged by 47.4% MoM to 112.8mn shares along with average value traded which increased by 49.7% MoM to USD 26.2mn. On the local front, Mutual funds and Insurance companies remained the largest off-loaders with net sell of USD 34mn and 10mn, respectively. While Individuals, Banks and Companies accumulated USD 28mn, USD 8mn and USD 6mn, respectively.