PSX - Weekly Review & Outlook
Investors are not in a hurry.
The out-going week witnessed marginally green movements as concerns over macro-economy & political noise fizzled out. Investors were quick to jump into the market early on only to witness profit taking later in the week. The negative sentiment seems to have ebbed so far.
Feeling the heat of inflation on masses, PM announced a Rs 120b direct support welfare package that would enable masses to buy food items at a 30% discount to market rates for 6 months. However, PM was quick to point out the petrol prices are cheap but are likely to go up due to rates in international markets.
The much delayed IMF program is appearing to resume shortly as several measures are already taken; increase in electricity prices by Rs 1.68/unit, increase in Petroleum Levy & probable agreement on SBP Autonomy bill as well. While the govt has pleaded that it doesn't have the required numbers in assembly to pass the bill, it seems to be the only bone of contention left.
Investors seemed to be taking a sigh of relief after a near $400m contraction in the Trade Deficit for October. If remittances continue to support, this month's Current Account Deficit would be well under control. This was also stated by Finance Minister that as of now, we are balanced.
Similarly, Chinese crackdown on Coal prices have revived investor sentiment but the regulator later stepped in to half the free-fall which saw Coal prices revert back to $150 from the lows of $120/ton. Nonetheless, given the price hike & moderate economic growth, investors are betting on cement sector again.
To enhance FBR collection - also to curtail imports - government is likely to introduce additional duties, reduce sales tax exemption, increase scope of Sales Tax on cell phones & put regulatory duty on non-essential items. These measures would moderate growth, be inflationary & curtail imports but are necessary to improve Pakistan's fiscal health.
Next week, we may also expect hike in Automobile prices under the pretext of rising freight, raw material costs and decline in PkR. We expect next week to remain positive as worries over Trade Deficit, TLP long march & Rupee depreciations take a back seat.