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Political and FATF rumors to push more uncertainty keep stocks bearish
Summary

The investors sentiment and trading during the week were build on two important developments: FATF watch list and the judiciary decision and its subsequent impact.

Member states of the Financial Action Task Force (FATF) have been meeting this week in Paris ,where it was expected that they would decide on a US motion – backed by Britain, France and Germany — to have Pakistan added to the so-called ‘grey list’ of countries not doing enough to comply with terrorist-funding regulations. All steps, decisions taken by ex-ousted prime minister Nawaz Sharif since his disqualification last year declared null and void. As a result Sharif nominees to be independent Senate candidates announced by the ECP.

Market opened positive on Monday. It remained in green and went intraday high of 318 points. The investors sentiments dampened over the news of inclusion of Pakistan in FATF terrorist watch list. Reasonable financial results of HUBC, FCCL, UBL and OGDC failed to boost investors’ sentiments. The KSE-100 Index shed 54.44 points and closed at 43,572.67. The trade volume declined by 15 percent and stood at 127m.

On Tuesday the market went further into negative as former prime minister Nawaz Sharif’s Monday statement calls for an ultimate debate in parliament as to who has the final say in the legislation. Investors went for profit-taking for which Index shed 277.72 points to close at 43,294.95. Major drags to the index came from financial sector.

On Wednesday Supreme Court decision declaring the controversial amendment to the Elections Act 2017 as well as all steps ,decisions and orders passed by Nawaz Sharif since his disqualification in July 2017 as null and void. The investors reacted sharply and the Index dropped by 375.17 points to close at 42,919.78. The foreign investors were seller by $8.46 million.

On Thursday reassurances from Nawaz Sharif over issuances of new tickets to PML-N candidates for Senate election and helping hand from FATF allies signaling a possible favorable decision improved investors sentiment and the market gained 608.73 points to close at 43,528.51. The foreign investors emerged as $0.1m buyers.

As there was no clarity on FATF, the investors took no risk and the market shed another 261.31 points to close at 43,267.20 on Friday. The individual were net seller by $5.52 m. During the week the KSE 100 Index lost 360 points, average volume declined to 184 million and market capitalization decreased by Rs64 billion to close at Rs.8,987 trillion.

 

Participants/Activity

On average shares of 360 companies were traded. Of these 148 were gainers and 192 were losers and 20 remained unchanged.

Foreigners were net seller of $2.79m during the week; companies were buyer by $5.97m, Banks were seller $2.74m ; Mutual fund net seller $8.87m and individuals net $11.17m.

Volume leaders during the week were: Dost Steel Mills Ltd 64m; Azgard Nine 58m; TRG Pak Ltd 45m; Lotte Chemical 32m; Dewan Cement 20m; Matco Foods Ltd 22m; Fauji Foods 15m; Bank of Punjab 11m; Dewan Salman 7m and Dewan Motors 6m.

Triggers
  • EU renews GSP plus scheme for two years.
  • Current account gap widens 48 percent. It rose during July-Jan to $9.156 billion.
  • Reserves decline to $18.8 billion ended Feb 16, 2018.
Conclusions

The coming week is rollover week. It might put pressure on the market.

 

Raees Uddin Khan,
Research & Development, Institute of Securities Management Research & Training (Pvt) Ltd, Karachi.
Dated: Feb 24, 2018

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