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Stocks move slightly up as calms return over Nawaz conviction

Summary

Decision on ex-prime minister Nawaz Sharif’s Avenfield properties reference on Friday, kept the market in uncertain mode during the week as investors remained cautious .The volume too dropped to 111m from 182m last week. The market capitalization lost Rs.307 billion from Rs.8,665 to Rs.8,358 trillion this week. The delay in announcing the decision by NAB court kept the investors at suspense. About 10 minutes before the close of the stock session saw no panic selling as stock gained 45.33 points to close at 40,284.14. This could be considered as a positive signal and end of uncertainty of five continuous bearish stock sessions.

The impact of inclusion Pakistan in the grey list last week and this week announcement by Fitch Ratings created a bearish sentiment in the stock market. The Fitch Report gave no change in credit rating, but growth forecast was revised down and current account deficit revised up. Report hinted at more exchange rate depreciation. Earlier Moody’s had already downgraded the rating . The amnesty scheme extended to July 31 has accumulated around Rs.100 billion, which has helped, as said by Chief Justice of Pakistan, paid the pension and salaries of federal government employees. The focus of Chief Justice and present caretaker government seems to mobilize funds through such schemes and loan recovery in installment to run the government.

Participants/Activity

On average shares of 329 companies were traded. Of these 120 were gainers and 181 were losers and 28 remained unchanged.

Foreigners were net seller of $8.06m during the week; companies were buyer by $5.49m, Banks were buyer $7.43m; Mutual Fund net seller $18.58m and individuals net buyers $9.29m.

Volume leaders during the week were: K-Electric 74m; Pak Elektron 27m; Siddiqesons (R) 23m; Bank of Punjab 16m; Pak Int’l Bulk (R) 14m; Unity Foods Ltd & TRG Pak Ltd 12m each; Fauji Foods Ltd 7m; Engro Polymer 6m; Siddiquesons Tin, Dewan Cement and Pak Int’l Bulk 4m each; Javedan Corp, D. G. Khan Cement and Fauji Cement 3m each.

A first day of the new fiscal year, Monday (July 2, 2018), ends in negative manner as stocks lost 177 points to close at 41,734.05. It was reported that Pakistan stocks gave a negative return of 10 percent of Pakistan Stock Exchange in FY18. There were rumors of reducing cement retail price by Rs.20 per bag to kill completion. Mega conglomerate had withdrawn its public announcement to acquire up to 87% share of the cement factory.

On Tuesday, commercial banks and oil and gas exploration companies remained major decliners from the Index. The Index lost 169 points to close at 41,564.42.

Wednesday was a dooms day for the market as it shed 1,219 points to close at 40,345.68. The release of Fitch Ratings report gave a negative view of Pakistan economy subject to external risks for Pakistan that could bring further devaluation of Pak Rupee.

On Thursday, political uncertainty over announcement of verdict for Avenfield corruption case in National Accountability Bureau (NAB) court on Friday kept the market take further dip of 106.87 points. The ex-prime minister Nawaz Sharif asked the court to delay the decision. The market, however, closed at 40, 238,81.

On Friday the uncertainty in the market ended at last stage of the market closure, the investors heard the NAB court decision. The announcement brings calm in the market as the Index gained 45.33 points to close at 40,284.14.

 

Triggers
  • Fitch report warns of growing risks to Pakistan’s economy.
  • Set back for K-Electric as Nepra refuses tariff hike.
  • Cement sales hit record 45.8m tons in 2017-18, export rise.
  • Inflation perked up 5.2 percent in June from 4.2 percent in preceding month, the biggest increase in three years and seven months.
Conclusion

Elections to be held on time 25th July has to be seen with no boycott for political calmness. On economic front the fast depleting foreign exchange reserves and fiscal balance as pointed by the Fitch report has to be corrected for a safe economy.

Technically the Index could revisit 40,106 and upward can go to 40,755.

Raees Uddin Khan,
Research & Development Institute of Securities Management Research & Training (Pvt) Ltd, Karachi.
Dated: July 7, 2018

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