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POLITICAL SHOWDOWN PUSHES KSE-100 INDEX DOWN AMID THIN TRADING
SUMMARY

During the week the political temperature in the country kept on high and low as per the movement of the rally of former prime minister Nawaz Sharif who chose to go on confrontation mode against the Panama Papers decision. This created uncertainty for equity investors who kept remain on sidelines. This is the evidence from thin trading, which dropped around 45 percent to an average of 189.92 million shares per day this week. The KSE-100 Index too dropped by 1588.88 points to close at 45,288.49. Last Friday, the Index closed well above 46,000 mark at 46,877.37. The market capitalization too dropped to Rs9.421 trillion from Rs9.541 trillion last Friday. Such is the impact of political noise on PSX working. Beside the political phenomenon created an air of uncertainty for the investors, which is very harmful for smooth functioning of PSX. Bears during the week dominated as the Index remained for four days in red except on Wednesday when it gained 19.11points.

KSE-100 Index, which was in positive last week by gaining 965 points during the week, started with selling pressure on Monday. The KSE-100 Index shed 411.71 points to close at 46,465.66. The day was an extension of negative trend developed on last Friday when it lost 206.97 points. The news of the rally started to be floated in market during that period.

Bears started to tighten their hold on the stock market on Tuesday. The market shed another 485.96 points to close at 45,979.70. The market opened and traded sideways until afternoon , making an intraday high by 52 points. Then panic -selling weigh down the stock exchange as Pakistan Awami Tehreek chief Tahirul Qadri addressed a public gathering in Lahore criticizing the Nawaz Sharif and Punjab Chief Minister. The volume declined to 205m from 241m on Monday.

There was mixed trend on PSX on Wednesday. After hitting an intraday low of 45,591.38, the Index regained remarkable with a rise of 500 points to finally close at 45,998.81 with a net addition of 19.11 points to the KSE-100 Index. The steel sector was in limelight: Aisha Steel Mills (+4.73%), International Steels (+4.97%) and Int’l industries Ltd (+4.32% closed near their upper circuit. The foreigners were net seller to the extent of $20.10m.

The stock exchange on Thursday opened on a resilient note and remained on positive mode till the mid-day making an intra-day high by 214 points. It then went for profit-taking on political nose and shed 364.79 points to close at 45,634.02. The trading volume too decreased by 18 percent with 175.28m from 213.72m a day earlier.

It seemed on Friday that investors chose to remain dormant ahead of long holidays of three days including Monday as Independence Day. The KSE-100 Index shed 345.53 points to close 45,288.49 with trading volume declining to lowest of 113.81 m.

PARTICIPANTS/ACTIVITY

On average shares of 382 companies were traded. Of these 125 were gainers and 241 were losers and 16 remained unchanged.

Foreigners were net seller of $31.20m during the week; companies were net buyer $3.03m, Banks were buyer $0.85m; Mutual fund net buyers $6,52m and individuals net buyer $3.72.

Volume leaders during the week were: Azgard Nine and Summit Bank 51m each; TRG Pakistan 50m; K-Electric 48m; Aisha Steel Mill 45m, B.O.P 27m; Byco Petroleum 12m; Pak Elektron and Pak Refinery 9m each; Sui Southern Gas and Dewan Motors 5m each.

TRIGGERS
  • Government settles Rs.26 billion refund claims on eve of rally.
  • Release of trade deficit $3.2 billion in July 2017.
  • Decline of foreign exchange reserves by $270m.
  • Report of government seeking loan to retire circular debt.
CONCLUSIONS

Political tensions is building pressure on stock exchange due to cleric Tahirul Qadri announcing sit in Lahore on next Wednesday. The notification is issued by government on Friday where PM to head ECC instead of Dar Finance Minister. NAB is expected to open up cases against Nawaz family in coming weeks.

RAEES UDDIN KHAN – Research & Development Institute of Securities Management & Research Karachi

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