Absence of major triggers, leading to decline in index 1.7%wow
Summary
The stock exchange is on continuous decline since February 2019 till this week. It seems that stock investors feel unsatisfied or uncertain about economic posture of the country particularly with ambiguity created on the matter of IMF package. Various conflicting statements and facts emerging on the economic front add to the miseries of investors.
Finance Minister Asad Umar while speaking to the National Assembly’s Standing Committee on Finance on Wednesday stated that gap over reform agenda for the next IMF program has considerably narrowed. Clarifying IMF stand: Exchange rate must be market based and there should be no interference by SBP; SBP should be given complete autonomy; Electricity and gas system loses be recovered in particularly and public sector losses be curtailed in general. Additional, the Fund’s opinion was that Pakistan’s fiscal house is not in order. Fitch Solutions in its most recent report titled “Pakistan: what to expect in the next IMF bailout package” argued that an agreement on the bailout package will be reached soon and that Pakistan has requested 12 billion dollars. The report further maintains that the package conditions would be “roughly in line with the consolidation program implemented in 2013.”
There seem to be de-escalation of chances of Indo-Pak war on Thursday after ‘constructive’ dialogue between India and Pakistan on the Kartarpur Corridor agreement in a ‘cordial environment’ taken place. Both India and Pakistan agreed to make the passage operational at the earliest.
The KSE-100 Index lost 643 points during the week.The average volume reduced to 93 million share from 114m previous week. The market capitalization declined to Rs7.873 trillion. The stock market during the week mostly remained flat and range bound. The foreigners remained seller to the extent of $15,58m. The selling was adequately bought by the companies, Banks and individuals.
On Monday, stock market opened on Finance Minister’s weekend positive statement that Pakistan is expected to receive $2.00 billion from Abu Dhabi soon under the agreement signed by both the countries. This led to intraday gain of 196 points. It, however, died down as market closed at 38,924.11 with loss of 26.12 points. The volume too declined to 68m.
On Tuesday there was choppy trading with intraday high of 39,031 and low 38,547 to close flat with loss of 27.62 points and index closed at 38,896.62.
On a dull session on Wednesday with volume 93m the stocks recovered 32 points to close at 38,928.53.
The foreigners remained seller on Thursday worth $8.24m to shed 120.32 to close at 38,808.61. The volume declined to 86m.
The losses were extended on Friday on precarious economic situation with no IMF deal in sight. The index shed 501.66 points to close at 38,306.95.
Participants/Activity
On average shares of 336 companies were traded. Of these 124 were gainers and 193 were losers and 19 remained unchanged.
Foreigners were net seller $15.58m during the week; companies were buyer 5.62m, Banks were buyer $3.22m; Mutual fund net seller $0.08m and individuals net $1.38m.
Volume leaders during the week were: Bank of Punjab 109m; K-Electric 39m; Unity Foods Ltd 27m; Dewan Cement 11m; World Call and Lottee Chemical 9m each; OGDC 12m; Fauji Cement 5m and Siddique Sons Tin 4m.
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Triggers
- Reserves held by SBP rose by $6 million to $8.12 billion during the week ended Mar 8.
- Benami Act rules notified. FBR announced on Wednesday the provision of Benami Act to confiscate whole properties, expensive vehicles and bank accounts registered with fictitious individuals to be effective from Feb 1, 2017.
- Current account deficit shrinks by 59 percent in February compared to January. SBP reported on Friday that CAD came out at $356 million, down from $873m in January, a decrease of $517m. During July-Feb CAD fell to $8.844 billion down 22.5 percent from $11.421 billion in same period last year.
- Foreign Investment (FDI) plunged by 41 percent to $168.8 million in February from $286.5m in same month last year.
- Car sales fall in eight months of current fiscal year by 1.3 percent to 14,462 units from 142,283 during same period.
- The country received $14.35 billion in foreign remittances during the first eight months of the current fiscal year which is an increase of 11.8 percent from $12.83 billion same period last year.
- Pakistan has received $1 billion from UAE on Tuesday with second tranche of 3 billion promised by Emirates failure to secure $3.2 billion oil facility.
- Report that International Maritime Organization (IMO) will impose emission standard that limits the maritime sector to use furnace oil with sulphur content of less than 0.5% from Jan-200 resulting in refinery sector performance down by 6.8%.
Conclusion
The pattern of trading for investors is to watch closely the intraday High and Low. The market is choppy and range bound for few weeks and no visible bullish or bearish trend line and direction of market in the stock market is available. It makes it mandatory for stock investor to follow the strategy of “Buy at Low and Sell on High” which is the golden principle of stock trading.
Efforts are being made by the government to stabilize the economy as said by Finance Minister on Wednesday addressing a two-day ‘Leaders in Islamabad Business Summit’. He said: “the government is working on structuring economy’s fundamentals and strengthening regulatory regimes by appointing qualified individuals – local as well as overseas – at policy board.” Hopefully the IMF issues till then will be decided adding strength and clarity about market for stock investors.