Market posts slight gain after fatf outcome concern, stability likely
Summary
Previous week it was IMF review which led market fall flat. This week the investors kept a close eye on the FATF meeting in Paris, which concluded Friday. Throughout the week, the concern for the meeting continued in the minds of investors and the market shed 232 points on Friday as outcome of the FATF meeting awaited keenly during the last day of the week.
The week also has a series of corporate results, which led to share movements. In Banks HBL profit jumps by 27 percent. It was higher than market expectation. Besides Engro profits jump by 27.12 percent, PSO profit soars 51 percent, Kapco second quarter profit higher by 87 percent in the same period last year.
The market on Friday closed with slight gain of 5.96 points at 40,249.22. The market volume declined from previous week by 36 percent to average of 107 million shares . The market capitalization declined by 33 billion to Rs.7.531 trillion. The foreigner continued seller by $8.58 million.
On Monday, the stock market closed about flat with a narrow gain of 33.67 points at 40,276.93. The volume declined to 100 million as FATF plenary meeting started in Paris.
The FATF concern remained on Tuesday besides investors were not inclined to take fresh position on macroeconomic concern. The market shed 101.58 points to close at 40,175.35. The volume declined to 92m.
There was a rally of 399-point on corporate results on Wednesday in which the Bank took the leading role HBL saw strong interest as its profit jumps by 27 percent .The index closed at 40,574.52.
It was a range-bound trading on Thursday and Index lost 92.87 points to close at 40,481.65. Foreign selling of $1.36m was mopped up by insurance companies that bought shares valued at $1.35m.
On the expected decision on Friday of FATF, the market shed 232.43 points to close at 40,249.22. Foreigners sold $1.60m, which was again mopped up by insurance companies.
Participants/Activity
On average shares of 332 companies were traded. Of these 1147 were gainers and 162 were losers and 23 remained unchanged.
Foreigners were net seller $8.58m during the week; companies were buyer by $1.99m, Banks were buyer $0.70m; Mutual fund net seller $1.22m and individuals net seller $3.13m.
Volume leaders during the week were: Unity Foods 65m; D. G. Khan Cement 35m; Hascol Petrol 27m; Maple Leaf Cement 22m; HBL 10m; Bank of Punjab 9m; Kot Addu Power 7m; PSO & TRG Pak Ltd 5m each; Fauji Foods Ltd 6m; PIBTL & Lotte Chemical 4m each.
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Triggers
– The country’s current account deficit plunged by 72 percent to $2.654 billion during the first seven months of 2019-20 from $9.479 billion in same period last year –a reduction of $6.825 billion reported by SBP.
– FDI surges $1.5 billion in seven months. The country attracted $1,663.7 million in FDI in July-Jan period on FY20, an increase of 65.7 percent.
– Cotton production fell by 20.12 percent to 8.6 million bales till January 15 this season against 10.7m bales in the same period last year.
– Pakistan’s total debt and liabilities rose 23.36 percent during the second quarter of this fiscal year.
– Foreign exchange reserves of the country further increased by $12 million to $18.747 billion at the end of Feb 14, 2020. The holdings of SBP increased significantly by $74 million to $12.504 billion in the week under review.
Conclusion
The market during the week was fluctuating between high and low of 700 points which is good opportunity for traders buying at low and selling at high. The corporate results further helped the traders to select the right stock.
As the State Bank Governor has said “Worst of stabilization now over” one can expect stability about forward direction in the index movement in future. Increased remittance inflows, FDI growth and exchange rate stability with foreign exchange reserves increasing are sign of positivity except export growth and LSM decline.
Raees Uddin Khan,
Research & Development Institute of Securities Management Research & Training (Pvt) Ltd, Karachi.
Dated: Feb 22, 2020