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Index settles above 41,000 mark on valuation and liquidity recovery
Summary

Last week when the KSE-100 Index, which trailing around 39,000 level had a bullish movement when it gained 950.75 points to close at 41,221.75. Notable was the participation of investors in the market as the average volume increased from 131m to 219m. The individuals remained the cherry picker at low valuation of the stock to be again a net buyer of $9.83m this week while foreigners continued to be seller worth $22.11m. The market capitalization which was negative last week went positive by Rs.159 billion to close at Rs8,476. Overall the Pakistan Stock Exchange (PSX) gained 2.4% WoW.

The stocks which were gaining four days last week suddenly went bearish on Monday and lost 605.23 points to close below 40,000 at 39,665.23.

The general despondency prevailing in the minds of investors regarding deteriorating external sector, the steep devaluation of the rupee (5% on Monday), rising policy interest rate on Saturday, the mounting circular debt for IPPs and political uncertainty added to the anxiety of the investors.

On Tuesday, stocks recovered 267 pints in volatile trading and closed at 39,932.98 points. Sectors which contributed to gain were fertilizer, food, banks, chemical. The oil scrips declines due to drop in international oil prices to a three month low.

On Wednesday, bulls continued to dominate as KSE-100 Index gained 964 points to close at 40,897.90. The traded volume jumped to 248m, which was an increase of 75 percent over the previous day. There was some stabilization of rupee after a 5 percent decline on Monday.

On Thursday, again the volume surged to 337m, this was the highest turnover in the last three months. The KSE-100 Index surged by 897.69 to close at 41,795.59. As a strategy, the investors seem not to carry over the stock for the weekend. Hence there was profit-taking in the market on Friday. The KSE-100 Index shed 573.84 points to close at 41,221.75. The volume too declined to 223m shares.

Participants/Activity

On average shares of 334 companies were traded. Of these 195 were gainers and 138 were losers and 22 remained unchanged.

Foreigners were net seller $22.11m during the week; companies were buyer by $7.32m, Banks were seller $8.51m; Mutual fund net seller $6.69m and individuals net buyers $9.83m.

Volume leaders during the week were: Bank of Punjab 66m,Pak Intl Bulk (R) 56m; Lotte Chemical 40m; Fauji Cement 38m; K-Electric Ltd 48m; TRG Pak & Fauji Foods Ltd 17m each; Engro Polymer 16m; Pak Elektron 14m; Bank Islami Pak & Pakistan Refinery Ltd 9m each.

 

Triggers
  • Pakistan rupee has weakened by Rs.11.89 against the dollar till Tuesday from June 1, 2018 when the caretaker government assumed the office. On Monday PKR drops to 128 per US$, about 5 per cent.
  • Major step taken to curb import on regulatory duty on import estimating collecting of $1.12 billion which will help reduce trade deficit. It was $37.67 billion during 2017-18 up by 15.95 per cent against last year.
  • Caretaker Finance Minister Dr. Shamshad Akhtar has begun technical bailout package , the decision of which rest with elected government.
  • Urea maker raise price for second time this month with cumulative increase to Rs.100 per bag.
  • Suleman S. Mehdi appointed as new Chairman of Pakistan Stock Exchange (PSX).
  • Punjab Pension Fund distributed to a number of Mutual Funds.
  • Increase SBP policy rate to 7.5% over weekend.
Conclusion

With Pakistan heading to the polls on 25th July, PTI according to most of the surveys and analysis seems to have edge ahead of the PML-N. It has to be seen whether it is going to be a majority party rule or a hung parliament .The economic challenges has to be tackled by the elected government like external accounts, IMF bailout package, depreciating rupee value etc. This will have impact on PSX.

Raees Uddin Khan,
Research & Development Institute of Securities Management Research & Training (Pvt) Ltd, Karachi.
Dated: July 21, 2018

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