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Despite foreigners support, stocks decline by 566 points on political uncertainty
Summary

Market remained in grip of political uncertainty during the week which kept it in negative zone although foreigner remained buyers for all five sessions with total purchases of $17.45m. The matter relating to amnesty scheme, ex PM NAB cases and disqualification matter and election dates kept the investors guessing although during week some of them were clarified.

The market during the week shed 1.21% points WoW while it gained 8.4pc during the last four weeks. It seems that market has taken a correction and profit-taking after continuous positive run for four weeks. The average volume too declined to 247m while market capitalization came down to Rs.9,443 trillion from Rs.9,531 trillion last week.

The Monday snapped the eight-day positive rally as investors booked profit during the day. The Index declined by 57points to close at 46,580.62 points. The sector that dragged the market were commercial banks 70 points, oil and gas E&P 22 points, chemical 14 points and power 14 points.

On Tuesday the stocks continued its decline as it shed103.89 points to close at 46,476.73. The investors seemed to be worried over the outcome of the amnesty scheme, which has to be debated in the parliament and the widening of trade deficit to $27.3 billion in 9MFY18 and the falling reserves.

Wednesday was the only day of the week when there was modest gain of 977 although the investors kept on profit-taking. The KSE-100 Index stood at 46,486.50. The investors kept on looking for a healthy triggers, which were not present. The positivity in the market came as PM stated that the caretaker set up would be in place for 60 days from June 1.

On Thursday, stocks again went for correction as Supreme Court decided to review the amnesty scheme and the possibility of subsidy removal on electricity rates for industrial consumers. The index shed 154.79 points to close at 46,331.71.

On Friday, the court decision against former prime minister Nawaz Sharif disqualifying him from contesting election for life brought index down by 259.85 points to close at 46,071.86. The sectors contributing to the fall were cement, exploration & production commercial banks oil & gas.

 

Participants/Activity

On average shares of 381 companies were traded. Of these 182 were gainers and 181 were losers and 18 remained unchanged.

Foreigners were net buyers of $17.45m during the week; companies were seller by $21.99m, Banks were seller $9.03m; Mutual fund net buyer $7.86m and Individuals net buyers $11.89m.

Volume leaders during the week were: Engro Polymer XD 76m; Sui Southern Gas 55m; Lotte Chemical XD46m; K-Electric Ltd 36m; Fauji Cement 26 m; TRG Pak Ltd and PIA C (A)22m each; Fauji Foods 32 m; Agri Tech Ltd 21m; Azgard Nine13m; Nimir Resins 9m and Balochistan Glass 5m.

Triggers
  • Supreme Court verdict disqualifying former PM for life time.
  • Release of trade numbers where exports increased by 24% YoY in March 2018.
  • Positive comments of amnesty scheme by Moody’s.
  • Remittances recording 5% YoY and 22% MoM growth at $1.77 billion during March 2018.
Conclusions

Technically the current of charts indicates that the index could face resistance near46,700. A break above could lead to 46,900. On the other side it could go to 45,600.

The hope of positive outcome of the amnesty scheme and a market-friendly upcoming federal budget could be a positive trigger for the market.

 

Raees Uddin Khan,
Research & Development Institute of Securities Management Research & Training (Pvt) Ltd, Karachi.
Dated: April 14, 2018

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