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Equities gain 293 points on positive budget-related expectations
Summary

The investors were expecting some positive incentives for the economy and stock exchange as this was the last budget to be presented by the PML-N government. This led to a high expectations and the market become bullish and the KSE-100 Index gained 0.62% to close at 45,542.78. The average volume too picked up to average 169m and market capitalization Rs 9.391 trillion; higher than last week. Budget related sentiments even absorbed some negative political news like disqualification of Foreign Minister, Khawaja Muhammad Asif and it ignored comparatively healthy results from Dawood Hercules, MCB Bank and Pak Elektron. Market was expecting subsidy for power sector, reduction in super tax on banks and withdrawal of 5 percent withholding tax on bonus shares.

Monday started with roll over week for future contracts with uncertainity over budget presentations and political uncertainty. The participation remained thin dropping to 113m from 128m last Friday. Companies like PSO, Engro and Kohat Cement disclosing some encouraging results and Sui Southern Gas on possibility of dispute settlement with K-Electric encouraged the investors. The KSE-100 Index gained 112.62 to close at 45,371.96.

The market on Tuesday gained tremendous momentum as better budget expectations, key companies announcing good results and foreigners who were net seller turned buyer by $0.53m. The market gained 504.74 points and the volume too increased 154m shares. The Index closed at 45,876.70. The market capitalization during the week touched the highest by Rs 9,449 trillion.

The rally during the week starting on Monday died down on Wednesday when the KSE-100 Index shed 158.36 points and closed on 45,718.34. The rumor of cut in cement process per bag affected the cement sector wiping out 51 points from the Index. The fall in international prices also affected exploration and production sector.

The selling pressure continued on Thursday. The news of Finance Minister Khawaj Asif’s disqualification and some poor corporate results caution the investors. The market dropped by 257.47 points to close at 45,460.87.

The positive budget expectation news started flowing on Friday, the day the Budget 2018-19 to be presented in evening. The market volume too increased to 225m from 170m on Thursday. The Index gained 81.91 points to close at 45,542.78.

 

Participants/Activity

On average shares of 379 companies were traded. Of these 178 were gainers and 182 were losers and 19 remained unchanged.

Foreigners were net seller of $2.80m during the week; companies were buyer by $4.71m, Banks were seller $9.11m; Mutual fund net seller $4.09m and individuals net seller $7.26m.

Volume leaders during the week were: Engro Polymer 39m; Pak Elektron XD 36m; Unity Foods Ltd 43m; Byco Petroleum 29m; Fauji Foods Ltd 23m; Fatima Fertilizer 19m; Bank of Punjab 18m; Lotte Chemical 26m; Sui Southern Gas 11m; Matco Foods 11m; Nimir Resins 8m; Fauji Cement 6m and K-Electric 5m.

Triggers
  • The Rupee sinks further in open market on Wednesday to Rs.119.50 SBP, forex dealers called meeting to discuss steps to contain dollar’s rise.
  • Caution and optimism expressed at CPEC conference in Karachi.
  • China Harbour Engineering Company Chief Executive Wang Xiopay said election in Pakistan take place after every five years but no Prime Minister completes his five-year, which is quite risky for foreign investors.
  • The Economic Survey 2017-18 said balance of payment remained under stress due to rising imports of capital equipment during nine months.
  • Textile exports increase to $9.9 billion in the first nine months of 2017-18.
Conclusions

Technically the Index could re-test support at the 50 DMA 44,616. But on upside will revisit high of 45,781 and could extend to 46,372 followed by 47,144. Depending on the announcement of coming Budget and the expected stock exchange friendly budget will see the Index go up.

 

Raees Uddin Khan,
Research & Development Institute of Securities Management Research & Training (Pvt) Ltd, Karachi.
Dated: April 28, 2018

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