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KSE-100 index gains 2%wow as political uncertainty vaporized
Summary

This week finally the two dates: appointment of caretaker prime minister and the relinquishment of power by PML-N government went smoothly, which had earlier created uncertainty for quite few weeks in the market. The market acted accordingly and there was positivity among investors, which boosted the KSE-100 Index by 839 points. The market capitalization too increased to Rs.8.907 trillion compared to Rs.8.731 trillion last week. The volume, however, remained stagnant at average 119m. The foreigners continued to be net seller to the extent of $17.46m.

A recent increase of policy rate by State Bank of Pakistan (SBP) by 50 bp to 6.50 created ripples when the market opened on Monday. There was volatility in the market and the Index went to a intra-day high of 469 to finally closed on the day with gain of 64.49 to close Index to 42,138.58. Surprisingly, banking shares were under selling pressure and the big for banks closed in red. During the day investors opted for profit-taking.

Tuesday saw the foreigners went for buying after continuous selling last week and starting the week as seller. They bought $3.54m worth of shares. This created a rally in the market and KSE-100 Index went up by 484 points to close at 42,622.74. Again the investors went for profit-taking after touching intraday high of 529 points. The volume declined to 120m.

On Wednesday, the market continued with rising Index which peaked intraday high of 151 points. As foreigners became seller in the market to the extent of $4.67m, the Index came down to low of 285 points to close at 42,546.48m. The banking sector remained negative as it brought the Index down by about 100 points.

There was some clarity on political front, extension of Prime Minister export package for three years, the successful auctioning of five and ten year bonds in Italy and possibility of foreign inflow in semi annual index review of MSCI. The market gained 300.16 points on Thursday and closed at 42,846.64.

The last day of the week Friday have some important political development before investors as PML-N government completed its five year s term and as Retired Justice Nasirul Mulk took oath as caretaker Prime Minister and the resolve to hold Election on 25th July. The investors still remained cautious and traded sideways to gain 66.17 points. The KSE-100 Index closed at 42,912.81.

 

Participants/Activity

On average shares of 339 companies were traded. Of these 184 were gainers and 133 were losers and 22 remained unchanged.

Foreigners were net seller of $17.46m during the week; companies were seller by $12.42m, Banks were seller $4.72m; Mutual fund net seller $3.54m and individuals net buyer $2.16m.

Volume leaders during the week were: Pak Elektron 44m; TRG Pak Ltd.35m; Dolman City Reit 25m; Bank of Punjab 20m; Fauji Foods Ltd 12m; Faysal Bank 10m; Unity Foods Ltd 8m; Ist Dawood Bank Ltd 7m; Lottee Chemical 6m and Pak Int Bulk 4m.

Triggers
  • World Bank to give $400m for green projects in Punjab.
  • Increasing fertilizer prices as well as the risk of water shortages in the coming months is expected to bring down the demand for fertilizer.
  • China to roll over $500m loan that expires on June 2018.
  • Pak Suzuki to increase car prices.
  • Retail prices increase in retail market.
Conclusions

The Index has formed a higher high and higher low that indicated potential for further rise to 43,630. Downside support is at 200 DMA that stands at 42,552. The RSI and Stochastic Oscillator have moves up. Interesting to watch the formation of composition of cabinet of caretaker PM cabinet.

Raees Uddin Khan,
Research & Development Institute of Securities Management Research & Training (Pvt) Ltd, Karachi.
Dated: June 2, 2018

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