Lahore

The equity market prolonged its bearish rally as the benchmark KSE-100 index dropped by 3.9 per cent weekly to close at 34,520 with average trading volumes dropping by 14 percent to 286 million shares a day. The negative sentiments were mainly attributed to (1) pressure on global equities and currencies amid devaluation of the Chinese Yuan, (2) international crude oil prices hitting a six-year low and (3) political uncertainty in the country. Even, better-than-expected result and dividend announcements for the quarter ended June 2015 by blue chip companies failed to revive market sentiments. Also, foreigners returned net sellers worth $43m during the week. Oil stocks continued to tumble amid declining international oil prices, while cherry picking in insurance stocks kept the sector in green. Other key highlights of the week were: (1) PM saying MQM resignations will not be accepted, (2) SECP tells bourses to complete demutualization process by Aug 25th, (3) FDI rising by 308% YoY in July 2015 to $75m, (4) Sindh Engro Coal Mining Company inking deal to make $500m financing available and (5) Banking deposits dropping by 5.25% MoM in July 2015.

Experts said that following regional markets, index led by foreign selling, declined by 3.9, which is the biggest weekly fall after 20 weeks.

Stock markets around the world suffered further decline on Friday amid concerns over the Chinese economy owing to its surprise move to devalue Yuan and renewed uncertainty over Greece following the decision by Alexis Tsipras to resign as Prime Minister. Asian currencies fell by 2-3% during the outgoing week which spurred foreigners to sell their stakes in Asian countries including Pakistan. Pakistan market witnessed a net selling of US$43.6mn, highest after 28 weeks. Major selling by overseas investors was seen in Oil & Gas, Electricity and Chemical sectors.

Oil & Gas fell 8.1%, Cement 4.2% while banks eroded 3.8% of its last week’s value. Investors also remained concerned about leveraged positions as single stock future roll-over will start from next week.

In T-Bill auction held during the week, govt raised Rs225.2b as against the target of Rs300b. Cut-off yields remained flat as 3-month T-Bill settled at 6.93% (amount accepted Rs5.9bn), 6-month T-Bill at 6.95% (amount accepted Rs29.6bn) and 12-month T-Bill at 6.97% (amount accepted Rs189.7bn).

HBL announced 2Q2015 earnings of Rs6.7bn (EPS Rs 4.6), down 20% YoY and 32% QoQ. Earnings decline of 20% YoY is largely attributed to increase in effective tax rates in 2Q2015 after Govt. announced new taxation measures for banking sector in Federal Budget FY16. Net Interest Income (NII) of HBL improved by 15% YoY to Rs20bn in 2Q2015. Major investment in high yielding PIBs by the bank (20% of deposits) and strong volumetric growth in deposits have contributed to strong growth in NII. The bank announced second interim cash dividend of Rs3.5/share in addition to Rs3.5/share announced in 1Q2015.

During the week, General Tyre & Rubber Co. (GTYR) posted FY15 earnings of Rs732mn (EPS Rs12.2), up 42.6%YoY, to Rs513.7mn (EPS Rs8.6). Gross profit increased by 21.5%YoY to Rs1.9bn in FY15 on the back of improved revenue growth of 10.2%YoY to Rs9.5bn.Pre-tax profit increased to Rs1.1bn, up 46.6%YoY, due to 20% YoY decline in financial charges, thanks to falling interest rates.

Pre-provision profit for the six months period of the NBP amounted to Rs22.3 billion compared to Rs. 15.6 billion of corresponding period last year registering an increase of Rs6.7 billion or 43%. Pre-tax profit amounted to Rs. 15 billion which is higher by 23% from the corresponding period last year. Due to recent budgetary changes, the bank had to record prior year tax charge of Rs.2.3 billion due to which pre-tax profit growth was not translated into after tax profit growth. After tax profit amount was Rs.7.5 billion as compared to Rs 8.1 billion for the same period last year. Earnings per share are Rs.3.54 as against Rs. 3.82 of the corresponding period last year.

Despite reduction in interest rates, net interest income of NBP increased from Rs. 19.4 billion in 1H 2014 to Rs. 24.1 billion in 1H of 2015 reflecting a healthy increase of 24% due to increase in balance sheet size and high yielding investments. The current and savings account (CASA) ratio improved to 75% compared to 72% at December 31, 2014 which helped in reducing the cost of funds and in improving NII of the bank. Non-interest income amounted to Rs. 19 billion, higher by Rs. 3.8 billion or 24.5% mainly due to increase in capital gains.