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Stocks on see-saw trading, close week on bearish note
Summary

The economic decisions that kept on pouring throughout the week by the new government had impact on the stock exchange trading as investors were keenly looking for it: ECC urea import decision entails big subsidy; Government to effect changes in Finance Act; China reaffirms commitment to CPEC; Government’s rejection on tax rate hike, are the circulating reports.

The economic uncertainty prevailed as no clear cut stand or plan was revealed on major economic issues like IMF bailout, changes in the budget proposal or recovery of looted wealth. No clear notification on above decisions.

In this see-saw movement of KSE-100 Index for the week, the index managed to gain 65.54 points to close at 40,920.31. The volume remained almost same as last week of 139m while the market capitalization dropped to Rs.8,465 trillion. The foreigners remained seller by $26.07m during the week.

On Monday, Economic Coordination Committee (ECC) meeting was set to decide regarding gas allocation to fertilizer companies, import of urea and increase in gas tariffs which was deferred, The KSE-100 Index shed 170.72 points to close at 40,684.05. Sector wise banking scrips contributed 133 points to the loss.

On Tuesday, Finance Minister’s assurance of reducing energy tariffs for export-oriented sectors and expectations of further depreciation of rupee put the textile sector in limelight with Nishat Mills, Gul Ahmed Nishat Chunian and Gadoon Mills closed in upper circuit. The KSE-100 Index closed 40,759.53 increasing by 75.46 points.

The relief received a day before was soon wiped off on Wednesday as the KSE-100 Index shed 237.49 points to close on 40,522.04. Possibility of cut in Public Sector Development Program sent shares of cement sector brought Index down by 67 point.

On Thursday, possible relief on reversal of previous budgetary measures by the present government brought positivity in the market. The KSE-100 Index gained 527.87 points to close above 41,000 to 41,049.91.

Finally the stocks closed bearish on Friday as the investors to go for profit-taking before weekend. The Index shed 129.60 points to close at 40,920.31.

 

Participants/Activity

On average shares of 366 companies were traded. Of these 178 were gainer and 169 were loser and 19 remained unchanged.

Foreigners were net seller $26.07m during the week; companies were seller by $4.99m, Banks were buyer $2.53m; Mutual fund net buyer $10.6m and individuals net buyers $4.64m.

Volume leaders during the week were: Unity Foods Ltd 60m; Maple Leaf 35m; K-Electric Ltd 25m; Fauji Foods & Descon oxy chem 22m each; TRG Pak Ltd 19m; Bank of Punjab 17m; Bank Al-Habib & Engro Polymer 11m each; Shabbir Tiles 7m and Fauji Cement 5 m.

Triggers
  • Foreign Exchange reserves declined by $261m to $9.62 bn.
  • Indus Motors & Pak Suzuki Motors sales of August ’18 dropped by 20%.
  • China agree to finance US$1.9 bn Karachi Circular Railway.
  • PM to make first foreign visit to Saudi Arabia.
Conclusion

Technically, the current formation is engulfing bull indicating a recovery trend ahead. RSI and Stochastic Oscillator have moved up. The upside target is 41,306 followed by 50 DMA at 41,569. A fall below 40,339 will resume downward trend. The support and resistance is 40,651 & 41,453.

Going forward it is imperative for the government to go for tough decisions about replenishment of reserves through looted wealth, rein in the twin deficit and update the present budget. Clear roadmap to handle the critical issues is needed to remove uncertainty.

Raees Uddin Khan,
Research & Development, Institute of Securities Management Research & Training (Pvt) Ltd, Karachi.
Dated: Sept 15,2018 

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