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Weekly Review

Confronting a period of intensifying political brinksmanship capped-off with the statutory dissolution of National and Provincial legislatures, the KSE-100 remained firm, returning +1.9%WoW, closing at 42,913pts. Despite a slew of positive news flows, particularly fundamental developments surrounding extension of subsidies for exports, strong fertilizer offtake and release of PkR31.3bn in sales tax refunds, the culmination of political formalities (finalization of poll dates, caretaker setup in the Centre) and upcoming flashpoints kept politics front-and-center of investor tendencies. Key news flows during the week were: 1) former CJP Nasirul Mulk named as caretaker PM in the first meeting of the constituted parliamentary panel for this purpose where consensus was agreed and accepted , 2) conclusion of five-year constitutional term of the National Assembly came to an end on May 31st as the ECP announced that general elections will be held on July 25, stating that the dates for filing nomination papers with the returning officers by the candidates will be from June 2 to June 6, 2018, 3) Pakistan has borrowed US$9.6bn from external sources during 10MFY18  of which US$1.6bn was through new foreign loans during the month of April'18, 4) the ECC of the Cabinet approved a package of five-year tax exemptions and a number of other incentives for former tribal region under federal and provincial administration, and 5) PkR31.3bn in sales tax refunds to traders and exporters were made by the FBR during the final hours of the outgoing PML-N government. Gains at the bourse were led by: 1) NML (+9.3%WoW), 2) ASTL (+8.0%WoW), 3) PSO (+5.2%WoW), and 4) NCL (+4.9%WoW). At the other end were: 1) PIOC (-3.8%WoW), 2) MLCF (-3.1%WoW), 3) HUBC (-0.7%WoW), and 4) UBL (-0.6%WoW), softening the index. Average daily turnover stabilized resting at 119.1mn shares being led by PAEL (53.9mn shares), TRG (44.1mn shares), BOP (30.6mn shares) and PIBTL (22.5mn shares).

 Outlook

Keeping glued to political developments (caretaker governments in Punjab, KPK, Balochistan) and conclusion of judicial proceedings in the political realm (decisions on delimitations, Sharif family accountability cases), sentiment driven market moves are expected. Based on these, fundamentals are expected to be on the backburner with low volumes leaving room for large/mercurial moves.