Pakistan stock exchange remains bullish, gains 749 points in post election rally

“Locals bought in morning trade as they believe that the PTI government will not be a hung government as was expected earlier,” Mohammed Sohail, CEO of Topline Securities, told Arab News. (RIZWAN TABASSUM/AFP)
Updated 26 July 2018
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Pakistan stock exchange remains bullish, gains 749 points in post election rally

  • Stock market welcomes PTI with bullish rally in morning trade
  • PTI’s clear majority in general election placates investors’ concerns of hung government, say analysts

KARACHI: The Pakistan Stock Exchange PSX reacted positively on Thursday following clear victory of Pakistan Tehreek-e-Insaf PTI-led by former cricketer Imran Khan in general elections.
The benchmark KSE 100 index closed 749 points or 1.8 percent higher at 42089 level.
In the morning trade the benchmark KSE 100 index opened 2 percent bullish as investors’ fears of hung government dissipated.
“Locals bought in morning trade as they believe that the PTI government will not be a hung government as was expected earlier,” Mohammed Sohail, CEO of Topline Securities, told Arab News.
The majority analysts and stock brokers were expecting the PTI to capitalize on difficulties facing the outgoing government of the Pakistan Muslim League Nawaz (PMLN) following the conviction and imprisonment of former Prime Minister Nawaz Sharif, possibly putting the PTI in a position to form the next government.
Unofficial results show that PTI secured around 119 National Assembly seats and will be able to form a coalition government with smaller parties and independents. The markets had expected the PTI to win between 85 and 95 seats.
Incomplete unofficial results suggest that the former ruling party has been able to grab 61 seats.
“Peaceful general elections and the likelihood of strong government are the two positives that the stock market is seeing at the moment. While the market might keep on celebrating a PTI clear victory for few days, I think, in two to three months’ time, much will depend on the effectiveness of economic steps, the path (followed by the) new government to control the economic deterioration,” Zeeshan Afzal, Executive Director Research at Insight Securities told Arab News.
Analysts commented that the market is reacting positively due to PTI winning with clear majority. Ahsan Mehanti, Chief Executive of Arif Habib Group, told Arab News: “The direction of the stock market will remain positive in the coming days.” 
The next government will face tremendous pressure to steer the country out of its vulnerable economic position and persistent foreign selling.
“We believe that a clear mandate at the federal level is a material positive for domestic equities. Tough economic decisions have to be made in the near term as the incoming government negotiates a new International Monetary Fund program,” Nauman Khan, head of research at Foundation Securities, told Arab News.
“Economic reforms at the heart of the program would once again include privatization, restructuring public sector enterprises (PSEs), broadening the tax base, improving the investment climate, resolving energy issues, and reducing untargeted subsidies.
“A strong mandate was essential for the new government to carry out these reforms,” he added.
Pakistan’s stock market was declared the best-performing Asian bourse in 2016 when investors got stunning returns of 46 percent. The benchmark index was able to hit an all-time high of 52,876 by the middle of last year, before the political turmoil that turned it from the best to worst performing market.
Imran Khan, who is pitching himself as the next prime minister of Pakistan, will have his work cut out for him if he is to form a government and fix the ailing economy.
Khan’s party has promised 10 million jobs, five million houses and a robust tax regime. He will have to contend with the country's debt, the devaluation of the rupee and previous failed policies.


Wall Street skeptical of Tesla’s promise to post net profit

Updated 33 min 2 sec ago
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Wall Street skeptical of Tesla’s promise to post net profit

  • The electric car and solar panel maker delivered more than 80,000 vehicles from July through September
  • As a group, they expect a net loss of $173.8 million, or 95 cents per share

NEW YORK: Tesla is showing some promising signs that it will make money as advertised in the third quarter, but Wall Street isn’t buying it.
The electric car and solar panel maker delivered more than 80,000 vehicles from July through September, and CEO Elon Musk told employees late in the quarter that it was close to profitability.
Still, of 15 analysts who follow the company, not one expects Tesla to make money. As a group, they expect a net loss of $173.8 million, or 95 cents per share.
“We’d be really very surprised if they posted a profit for the third quarter,” said Garrett Nelson, an analyst for CFRA Research. “This is a company that lost over $3 per share each of the last two quarters. To go from that to all-of-a-sudden profitable would take a dramatic improvement.”
There also were warning signs from the company about reduced profit margins in China due to import tariffs charged by that country in response to US tariffs, Nelson said.
Tesla has achieved profitability before, but only in two quarters since becoming a public company in 2010. It has never posted a full-year profit and it lost $717 million in the second quarter and burned through more than $739 million in cash.
In a cheerleading email to employees as the third quarter closed in September, Musk wrote that Tesla was close to “proving the naysayers wrong.” The company, he wrote, must execute well on Sept. 30, the quarter’s final day. “If we go all out tomorrow, we will achieve an epic victory beyond all expectations. Go Tesla!” wrote Musk, who has been pledging profitability since early May.
Musk and Tesla have defied the odds before by successfully upending how electric cars are designed, produced and sold. Last quarter, Tesla nearly doubled production of its crucial Model 3 sedan just as Musk had promised, hitting 53,000. The Palo Alto, California, company delivered more than 83,000 vehicles in the quarter, over 80 percent of what it delivered in all of last year. There also were reports, however, that it was having trouble delivering Model 3s after producing them.
The company has also been plagued with one controversy after another, much of it self-inflicted as a result of Musk’s erratic behavior. During the last quarter, he ran afoul of the Securities and Exchange Commission, which filed a lawsuit alleging that he misled investors by falsely declaring on Twitter that he had lined up financing to take Tesla private. The SEC wanted to oust Musk as CEO as punishment, but in a settlement, Musk agreed to step down as chairman for three years. Musk and Tesla will each pay $20 million to resolve the case, and he also must have someone monitor his company-related tweets.
Now all eyes are back on Tesla’s financial performance. Nelson said posting a profit under national accounting standards hinges on how much money the company made per vehicle. He also said the accounting standards allow for Tesla to take some sales from the fourth quarter and put them on the books for the third quarter in order to realize more revenue. But that would make it profitability harder in the fourth quarter.
Tesla’s stock soared 12.7 percent on Tuesday to $294.14, largely because a longtime short-seller reversed course and said it would invest in Tesla for the long haul.
Citron Research, which had bet against Tesla stock for years, wrote in a note posted on its website that Tesla is destroying the competition. It produced charts showing that the mass-market Model 3 was the top-selling US luxury car during the first half of the year, more than doubling its closest competitor, the Mercedes C Class. Another chart showed Tesla’s Model S sedan atop the US large luxury car market with an estimated 8,000 sales.
Citron wrote that Tesla is not just pulling customers from luxury automakers but also taking sales from Toyota and Honda.
“As much as you can’t believe you are reading this, we can’t believe we are writing this,” Citron wrote.
Tesla has $1.3 billion in debt payments coming by early next year, raising concerns from analysts that it will have to borrow cash or issue more stock. It’s already $10 billion in debt.
But Citron wrote that a strong quarter could make another capital infusion unnecessary. “Tesla will be generating more than enough cash to fund both aggressive growth plans and build cash on the balance sheet,” the company wrote.