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

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.

Adnoc said to plan regional oil marker

ADNOC headquarters in Abu Dhabi. The company is considering dropping destination restrictions on all of its oil and allowing it to trade freely on the open market. (AFP)
Updated 4 min 6 sec ago

Adnoc said to plan regional oil marker

  • Aims to launch in-house trading for refined products to boost global clout

DUBAI: The UAE’s state-run ADNOC plans an overhaul for its trading operations as it seeks to emulate the success of rival oil majors and bolster its regional influence.
The company has splurged on hiring former employees of private-sector peers and wants to launch a regional oil benchmark, possibly this year, similar to international markers Brent and WTI, four sources familiar with the plans said.
The plan is not yet finalized and still has to be approved by UAE authorities, such as the Abu Dhabi Supreme Petroleum Council, the sources said.
ADNOC did not respond to a request for comment.
“ADNOC hopes the benchmark will allow it to earn more money and gain bigger prestige in the region,” one of the sources said.
The UAE, the third-largest oil producer in OPEC, behind Saudi Arabia and Iraq, pumps around 3 million barrels per day. It plans to boost output to 4 million bpd by 2020. Most of that oil is produced by ADNOC, based in the country’s capital, Abu Dhabi.
For many years it has traditionally sold oil directly to end-users, mainly in Asia, based on a retroactive pricing system rather than the forward pricing used by Saudi Arabia, Kuwait and Iraq.
Now, the company wants to launch full, in-house trading for refined products and crude as part of energy-sector reforms under Sheikh Mohammed and ADNOC Chief Executive Sultan Al-Jaber.
ADNOC is considering dropping destination restrictions on all of its oil and allowing it to trade freely on the open market, as part of a broader transformation to become more proactive and adaptive to market changes, the sources said.
“The idea behind trading is simple — the UAE sells its crude to someone like BP, which then takes it to the UK, where it is refined into jet fuel which then goes to refuel the UAE’s Etihad planes,” one source said, referring to the Abu Dhabi airline.
“So why can’t ADNOC capture some of the value of trading and the supply chain?“
ADNOC is venturing into oil trading as part of an international expansion aimed at securing new markets.
In January, it signed agreements worth $5.8 billion with Italy’s Eni and Austria’s OMV covering refining and a new trading venture to sell refined products jointly.
Over the past year, ADNOC has hired a raft of ex-Total traders, led by executive vice president Philip Khoury. The others include ADNOC’s head of crude, Emmanuel de Reynies, head of products Lionel Richardson, and Jean Marc Cordier, Francois Chupin and Aegidia Schnepp.
Traders from other oil majors and trading houses also joined, including Suzanne Mullen, previously of BP and Citi.
“These guys know how trading works, how benchmarking works,” one of the sources said.
ADNOC has held talks with French energy company Total and trading house Vitol as part of its new crude oil pricing and trading overhaul, the sources said, while beefing up its in-house trading team.
Total and Vitol declined to comment.
One of the options is for ADNOC to team up with a large player whose worldwide storage facilities it would use.
ADNOC is in talks for a stake in Vitol’s storage business VTTI, two of the four sources said.
VTTI owns storage in the Netherlands, the US, Asia and Africa. In the UAE, VTTI holds storage in Fujairah, a bunkering hub where ADNOC sends most of its crude, bypassing the often-troublesome Strait of Hormuz, which is further north. Around a fifth of global oil supply transits through the strait. Tensions between Iran and the West have contributed to fears of disruption there, sparking price rallies.


• ADNOC hires former Total traders in bid to rival majors.

• Seeks to turn Murban crude into benchmark.

• Moves seen as part of drive to increase regional influence.

Inside ADNOC, there are growing views that the company could turn its flagship crude Murban into a regional and possibly global benchmark more popular among foreign buyers by using its ability to export and store oil away from the strait.
Murban is exported from Fujairah and is relatively insulated from possible regional unrest, three of the sources noted.
The Abu Dhabi Crude Oil Pipeline, with a capacity of 1.5 million bpd, carries the bulk of the UAE’s crude production to ADNOC’s storage and loading facilities in Fujairah. ADNOC is also building oil storage under the mountains of Fujairah, with completion due next year.
So far, most Middle Eastern grades including those of Saudi Arabia are priced off the Dubai/Oman benchmark for Asian exports, off Brent-related indices for European exports and various US indices for US shipments.
ADNOC may announce plans to launch Murban as a benchmark as early as November and is talking to a number of exchanges including Intercontinental Exchange (ICE) and the Chicago Mercantile Exchange (CME), the three sources said.
ICE and CME declined to comment.
One source said ADNOC had made it clear during discussions that it was prepared to remove all restrictions on oil resales, a key condition for a crude grade to become a benchmark.
Other key conditions for the success of a benchmark are stable and fairly large oil flows and a developed derivatives market, allowing hedging and forward trading.
“The fact that ADNOC wants to turn Murban into a destination-free grade shows they are serious about making it a benchmark,” a source said.
Soaring US production of predominantly light crude could help Murban, also a light grade, become a benchmark even though most regional grades are heavier.