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Pakistan Equity Market: Weekly Review - Market Erased FY18 Losses on Amnesty Scheme

• The KSE100 index rose 2.4% during the week, gaining 1,077pts, and closed at 46,637pts on Friday. Average volume traded picked up significantly, rising 8% WoW to 260mn shares. The outgoing week’s surge has taken 2018TD gains to 15.2% and has completely wiped out the entire losses for FY18TD. 
• In global markets, US President Donald Trump has ordered his administration to put together a plan for an additional USD100bn in tariffs on imports from China, escalating a trade fight with Beijing that has unnerved financial markets around the world. The development came in as a response to China’s announcement of 25% tariff on US imports worth USD50bn.
• Coming back to Pakistan Equities, the performance was driven by expectations of Amnesty Scheme, which was eventually announced after market hours on Thursday. Prime Minister Shahid Khaqan Abbasi announced tax reforms aimed at clamping down on tax evaders. Major points discussed in the package are: 1) downward revision in income tax rates for individuals, 2) nominal penalties on undeclared assets held locally or abroad and 3) measures to document the real estate sector.
• Banks and Cement Sectors were the largest contributors to the index rise during the week, contributing 203pts and 193pts respectively. Commercial Banks returned 1.2% WoW in anticipation of amnesty scheme leading to expectations of 1) prospective higher fee income owing to one-off increase in foreign repatriations, 2) gradual increase in the pie of documented economy and 3) increase in banking deposits.
• The Cement Sector returned 3.8% WoW and contributed 18% to index rise. The sector’s performance was attributed to the rise in cement bag prices by another PKR10/bag during the week. Cement prices have so far risen by PKR45-55/bag in North, due to pick up in seasonal demand and to pass on higher landed price of coal. Strong demand has also benefited the sector with 9MFY18 off takes up by 14%YoY.
• Fertilizer Sector also stood out during the week, as it gained 1.7%, on reported provisional growth of 67%YoY in Urea off takes during Mar-18, taking 1Q2018 offtake growth to 44%. Apart from hinting towards strong quarterly results, the fast depleting Urea inventory in the country also led to expectations of price hikes going forward; which served as cherry on top of rumors of favorable fertilizer policy to be announced in coming days.  Resultantly, Fauji Fertilizer (FFC) and Engro Fertilizer (EFERT) rallied by 2.7% and 2.3% during the week. 
• Amongst other stocks, Pakistan Oilfields (POL) posted a significant WoW return of 8.7% driven by rumors of a significant hydrocarbon.
• Net foreign inflow during the week was USD3.6mn. Banks/DFIs were the largest sellers during the week at USD15.9mn followed by Companies which sold USD8.6mn. On the other hand Mutual Funds were net buyers of USD45.4mn.