Market recovers after 4-week bearish spell on positive IMF review and FATF development
Summary
The stock market after continued 4-week of decline from January 13, 2020 finally closed this week on a positive note with gain of 99.63 points.
The investors during the period seemed to be worried about the political stability of the government, its survival, the rising inflation, the economic stability and the Financial Action Task Force (FATF) action plan.
The end of IMF Mission press conference on Friday and statement “Considerable progress has been made in the last few months in advancing reforms and continuing with sound economic policies.” The court decision of sentencing banned Jamaatud Dawa (JuD) Chief Hafiz Saeed and his aides including Malik Zafar Iqbal for terrorism financing, Hammad Azhar Minister for Economic Affairs commitment to succeed in FATF Plenary & Working Group meeting in Paris from Feb 16-23 and the visiting Turkish President’s reiterating his country’s support against FATF challenge add strength to Pakistan’s effort to come out of grey list.
During the week the KSE-100 Index dipped to 39,000 level finally recovering and closing on Friday at 40,243.26. The average volume remained 168m shares like previous week, while market capitalization decreased byRs.11 billion to close at Rs.5.564 trillion. The foreigners this week remained seller with $11.10m.
On Monday, the Index plunged 846.93 points to close below 40,000 level to 39,296.70. The Mutual Funds turned out to be the heaviest seller worth $5.20m.
Trading started on firm note on Tuesday but remained choppy during the day, In the final hour the gains were seen in market mainly to buying by insurance companies to the tune of $2.46m. The Index gained 417.78m points to close at 39,714.46.
The stock market crossed 40,000 mark on Wednesday and gained 816.67 points to close at 40,531.13. The Mutual Funds which were major seller on Monday turned out to be major buyer with $5.04m.
The stock market started on firm note with early gains, which, however turned choppy and closed 75.69 down at 40,455.44.
The stock market ends Friday session on bearish note. The Index shed 212.18 points to close at 40,243.26.
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Participants/Activity
On average shares of 345 companies were traded. Of these 151 were gainers and 175 were losers and 19 remained unchanged.
Foreigners were net seller $11.16m during the week; companies were buyer by $4.53m, Banks were buyer $3.64m; Mutual fund net seller $3.42m and individuals net buyers $2.03m.
Volume leaders during the week were: Unity Foods Ltd 66m; Hascol Petrol 44m; Maple Leaf 40m; D. G. Khan Cement 26m; TRG Pak Ltd 20; Pak.Intl Bulk Ter13m; Lottee Chemical; Al-Shaeer (R) 10m each; Avanceon Ltd 9m; PIA C(A); Pak Elektron 6m; and Bank of Punjab 4m.
Triggers
– SBP reserves rise by $157m in $12.430 billion during the week ending on Feb7. The total reserves improved to $18.875 billion.
– The hot money inflows in T-Bills in the ongoing month at $215m taking the total to $3.114 billion.
– Pakistan signed a Memorandum of Understanding on trade facilitation and customs cooperation matters.
– Yields for 12-month paper up 39bps. Government raised Rs.274 billion on Wednesday through auctions of treasury bills.
– Pakistan auto sector continued to show dismal performance during the first seven months of 2019-20 with car sales plunging by 44 percent.
Conclusion
Businesses are mostly optimistic about the country’s economic performance in the immediate future according to Business Optimism.
Index released by Dun & Bradstreet, a global database and risk management company. Large scale companies are relatively more optimistic than small and medium enterprises. Companies in the service have a more positive outlook than those in the manufacturing and trading segments.
The composite score on the Business Optimism Index is 144.6 points compared to the benchmark neutral value of 100 points. This reflects an upbeat business sentiment in contrast to mixed trends found in similar surveys recently conducted by large trade bodies and polling agencies.
Raees Uddin Khan,
Research & Development Institute of Securities Management Research& Training (Pvt) Ltd, Karachi.
Dated: Feb 15, 2020