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STOCKS RECOVER AS SENTIMENTS IMPROVE AFTER HBL SETTLEMENT AND FOREIGN BUYING
SUMMARY

The market remained under tense situation last week when the PSX recorded lower lock in HBL shares on all four sessions and overall the market shed 3.3% points WoW. The market sentiment improved in closing stages of the present week when the news of HBL agreeing to pay $225m fine by settling out of court with the Department of Financial Services (DFS) of New York. Bullish momentum returned as HBL (+5%) opened at its upper circuit on Friday.

The KSE-100 Index finally closed on Friday by adding total 194.03 points during the week at 41,401.02. Besides institutions supporting the buying, the foreigners who were seller worth $14.29m last week closed as buyer $0.34m this week. Overall average turnover improved to 135.92m and market capitalization to Rs8,698m.

After Eidul Azha holidays, market opened on Tuesday on a positive mode. The rally was led by foreigners who made a heavy buying of $6.34 million. The volume stood at 108m shares, 53% higher than last trading day. HBL fell by 5pc. KSE-100 Index gained 572.21 points to close at 41,779.20.

The KSE-100 Index failed to sustain the bullish rally on Wednesday and it shed 389.21 to close at 41,389.99. It seemed that 41,000 proved to be a strong resistance. The foreigners stood on sidelines and turned again seller of $0.65m. HBL fell 5pc and it wiped out 26pc of its stock price since the announcement of penalty preceding Monday.

On Thursday, the KSE-100 Index fall below 41,000 to close at 40,389.99 points thus dropping 431.34 points . HBL lost 4.6pc to close below Rs153 per share.

Bullish returned on Friday as HBL (+5%) opened at its upper circuit on the news of Bank agreeing to pay fine of $225m to FDS, New York. The KSE-100 Index gained 442.37 points to close at 41,401.02

PARTICIPANTS/ACTIVITY

On average shares of 374 companies were traded. Of these 168 were gainers and 190 were losers and 16 remained unchanged.

Foreigners were net buyer of $0.34m during the week; companies were net buyer $2.29m, Banks were buyer $1.62m; Mutual fund net seller $11.02m and individuals net buyer $10.78m.

Volume leaders during the week were: TRG Pakistan 59m; Aisha Steel Mills & Azgard Nine 30m each; HBL XD 14m; JS Bank & Engro Polymer 13m each; K-Electric 11 m; Sui Southern Gas, Habib Metropolitan & Pak Elektron Ltd 6m each.

TRIGGERS
  • HBL agrees to pay $225m fine.
  • Foreign exchange reserves recording an increase of $386m on Aug 31, 2017.
  • CPI jumps to 3.4pc in August-2017.
  • China confirms no change on its policy after BRICS showed concerns over terror outfits in Pakistan.
  • Fiscal deficit hits four year high at 5.8%.
  • Increase in prices of petrol by Rs2/litre.
CONCLUSION

The Stochastic, Oscillator has improved and a bullish divergence has been created on the RSI suggesting a recovery trend ahead with 42,233 and 43,190 in sight. The index could revisit low of 40,686 to 40,257.

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

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