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Stock Watch
Coronavirus specter strikes PSX, KSE-100 index down 5.6% wow
Summary

The coronavirus epidemic, first detected in China in December, has gripped the world trade and affected the equity market the world over.

The Dow Jones Industrial Average fell 588.05 points. MSCI gauge of stock across globe shed 2.42% for a weekly loss of over 11%, it’s second largest on record. The over $5 trillion lost in market cap is roughly equivalent to Japan’s yearly GDP, the third largest in the world.

Pakistan also confirmed on Wednesday first two cases of coronavirus. Pakistan Stock Exchange during the week lost 2,266 points and its equity of 436 billion was wiped out and the market capital stood at Rs.7,095 trillion on Friday. It was Rs.7, 531 last Friday. The foreigners were biggest seller worth $22.5m. During February ending they sold stocks amounting to $56.40m.

The market remained bearish throughout the week. On Monday, the market lost 1.105.49 points to close at 39,143.73. On Tuesday it shed 285.28 points to close at 38,858.45. On Wednesday, the market lost 520.12 to close at 38,338.33. On Thursday, the market lost 251.01 points to close at 38,087.32. Finally on Friday it shed 103,70 points to close at 37,983.12.

Participants/Activity

On average shares of 350 companies were traded. Of these 112 were gainers and 221 were losers and 17 remained unchanged.

Foreigners were net seller $22.5m during the week; companies were seller by $3.7m, Banks were buyer $7.77m; Mutual fund net seller $11.58m and individuals net buyers $1.23m.

Volume leaders during the week were: Unity Foods 111m, Bank of Punjab 36m, Hascol Petrol 61m, K-Electric 7m, Maple Leaf 34m and TRG Pak 23m.

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Triggers

– Global stocks slumped to mark the largest drop on Friday since 2008 global financial crises over fears the coronavirus could break havoc on the world economy.

– SBP reserves jump by $87m to $12.591 billion during the week ended Feb 21.

– Gold hits new peak on Monday to Rs.96,300 per tola.

– PSX new CEO, Farrukh Khan, takes charge of his office as the MD and Chief Executive Officer of the Pakistan Stock Exchange.

– Pakistan’s presence in grey list negative for Banks: Moody

Conclusion

Research report of Sherman Securities says: “We relate huge selling by foreigners and sharp decline in Index to global sentiments in equity markets as concerns on global outbreak of COVID-19 (Corona Virus Disease 2019) intensified in February 2020.”

Given that countries having robust medical system, such as Italy, South Korea and Japan have been struggling with multiple cases, it might have been possible to entirely avoid the contagion. There is need on part of government to improve its system. An awareness campaign about the disease precautions needs to be run on a sustained basis until the virus is eliminated.

In the panic of the coronavirus the investors overlooked all the positive developments in economy like: Completion of the second review and agreement with the IMF to release the third tranche worth $450m.

Raees Uddin Khan,
Research & Development Institute of Securities Management Research & Training (Pvt) Ltd, Karachi.
Dated: Feb 29, 2020

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