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BAILOUT EXPECTATION BLOSSOM ON POSITIVE STREAK WITH STOCK GAINING ABOVE 42,000 LEVEL
SUMMARY

The stock market which was trailing below 40,000 last week hiked to 42,000 this week on the weekend news of meeting of PM, Mr. Shahid Khaqan Abbasi with Stock Brokers and other stakeholder of PSX to discuss how the tumbling stock at PSX could be revived. The possibility of a bailout package worth Rs20 billion was discussed the details of which still to be informed.

This news brought positive sentiment among investors and market remained positive for four sessions with a gain of 2,241 points in the KSE-100 index to close at 42,087.89 on Friday. The average volume improved to 184.63m from 145.79m last week. The market capitalization too increased to Rs8.619 trillion from Rs8.316 trillion last week.

Another key political news during the week was ex-prime minister Nawaz Sharif’s & family indictment on corruption charges on Thursday by accountability court. While key earnings announcement continued during the week.

Stocks bounced back on Monday on bailout news of the week end. Investors hopes were revived when a delegation of stockbrokers, mutual fund managers and other stakeholders met Prime Minister Shahid Khaqan Abbasi. The PM gave direction to establish a committee which would submit proposal to revive the market. The exploration and production sector gained 158 points as the Iraq-Kurdistan conflict and the possibility of new sanction on Iran drove up oil prices. The market gained 944.61 points o close at 40,791.39 points.

Investors took advantage on Tuesday and opt for profit taking and the market shed 66.43 points to close at 40,724.96 Main laggards for the day were Hubco, SNGPL, HBL, PAKT and Lucky Cement. The investor remained concerned by ongoing political turmoil.

On Wednesday the stock saw late recovery avoiding a loss of over 500 points with DG Khan Cement’s positive earnings announcement attracting massive buying. The index closed positive with a gain of 8.49 points at 40,773.45.

A decisive movement on the political front due to ex-prime minister Nawaz Sharif ‘s indictment on corruption charges and announcement of above-average financial results by notable index names generated positive investor sentiments. The KSE-100 index gained 824.62points to close at 41,558.07.

The positive streak generated during the week continued on Friday and finished the last trading day of the week Friday with a gain of another 529.82 points to cross 42,00 to close at 42,087.89 points. Investors seemed to be encourage some clarity on legal political issue of ex-pm and expectation of a relief package for the market.

 

PARTICIPANTS/ACTIVITY

On average shares of 383 companies were traded. Of these 227 were gainers and 140 were losers and 16 remained unchanged.

Foreigners were net seller of $7.94m during the week; companies were net buyer $2.73m, Banks were buyer $8.75m; Mutual fund net seller $4.28 and individuals net seller $5.23m.

Volume leaders during the week were: Engro Polymer 61m; Aisha Steel Mills & Dost Steel Mills Ltd 46m each; TRG Pak Ltd 44m; K-Electric Ltd 41 m; Azgard Nine 27 m; Engro Fertilizer & Chakwal Cement 11m each; Inter Steel Xd 7m; Pak Elektron 6m and B.O.P5m.

TRIGGERS:
  • Sign of easing tension with US after President Trump describing relationship with Pakistan as much better & announcing support for CPEC.
  • Court indicting Ex-Pm Nawaz.
  • Ministry favoring Textile Industry ‘s demand of reducing gas & power tariffs.
  • Ministry aiming to take IT exports to US$10 bn.
CONCLUSIONS

It seems that market is poised for recovery if bailout package is announced. Technically next upward level could be 42,190 going upto 43,436. A downward decline could go to 40,733.

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

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