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Worst weekly 2018 meltdown, KSE-100 index down 4.3pc
Summary

Government is challenged to perform on economy, public expectation of recovering looted money and improving the governance of different government sectors. In an effort to attain 100 days target set for itself, the government seems to be aiming simultaneously on all these issues prudently. As a result no clear picture is emerging for the investor on any single matter. Nonetheless direction has been set. Weighted decisions have to be made as true facts are emerging.

IMF delegation is in the country with negotiations going-on, Saudi Investment MoU is signed with the amount to be disclosed. The Mini-budget is passed by the Parliament with disappointment for the stock brokers not including their recommendations. The increase of 100 base points to central bank rate last week to 8.50 percent in Monetary Policy with scope of future rise, is clear sign of rise in inflation.

On the political front accountability is going on with the arrest of opposition leader and PML-N Chief Shahbaz Sharif for the looted money with more in pipeline in future. The order for freezing and recovering amount is made but actual amount recovered is unknown.

The stock market investors with so much happening on economic and political front with by election on 21st October are confused and unclear. As such the week saw the highest decline of 1,772 points in PSX during the week. The investors are staying away with volume decline by 11 percent to average 113m. The market capitalization eroded by Rs.336 billion to Rs.8,067 trillion. The foreigner remain seller with $8.42 million.The-100 Index closed on Friday below 40,000 to 39,226.35.

The effect of Monetary Policy increase in bank rate by 1 percent to 8.50 percent on Saturday had its impact on stock-exchange on Monday. The market shed 69 points to close at 40,929.44.

Bearish spell continued in stock-exchange on Tuesday as the KSE-100 Index declined by 129 points to close at 40,800.25. Core inflation increased to 8 percent in September, a four-year high. The volume remained almost same as on Monday to 106 million.

On Wednesday while passing the Finance Supplementary (Amendment) Bill 208-19, the government again put a ban on non-filers. Contrary to the expectation of PSX Stock Brokers Association who argue that a huge burden of taxes, rules and regulations are imposed on them, no concession is given to them. The stocks went for a fall of 240.06 points to close at 40,560.19 points. The volume declined to 90m.

On Thursday the market shed 473 points to close at 40,087.12. The government made the decision to remove top officials appointed by ex finance minister Ishaq Dar which include the head of four banks — NBP, First Women Bank, Zarai Taraqiati Bank and SME Bank along with senior official of regulatory bodies of SBP, SECP & CCP.

Finally on Friday a combination of economic and political news of arrest of opposition leader Shahbaz Sharif affected the market. The KSE-100 Index tumbles with 860 points to close at 39,226.35. The volume advanced to 154m on Friday from 110m on Thursday.

 

Participants/Activity

On average shares of 353 companies were traded. Of these 101 were gainer and 232 were loser and 20 remained unchanged.

Foreigners were net seller $8.42m during the week; companies were buyer by $5.19m, Banks were buyer $2.45m; Mutual fund net seller $4.84m and individuals net buyers$0.54m.

Volume leaders during the week were: Unity Foods 40m; Bank of Punjab 35m; TRG Pak Ltd 29m; Descon Oxychem 13m; World Call 9m; PIBTL 15m; Fauji Foods 6m; Lottee Chemical 7m; Bank Alfalah XDXB 8m; Nishat Chunian 8m; Sitara Per Oxide & Dolman City XD 9m each; Pak Elektron & Engro Polymer XD 4m each.

Triggers
  • The IMF observations on measures to stabiles included more exchange rate flexibility and monetary policy tightening.
  • Forex reserves saw sharpest fall in years, drop by $627.7 million to $8.4 billion during the week ending Sept.28.
  • The country’s annual inflation eased to 5.12 percent in September from 5.84 percent in August.
Conclusion

The economy and the political systems are undergoing structural changes for the betterment. Once the budget issues relating to capital market are addressed the Index may see positive movement. One has to watch for these changes as fate of the stock index depend on it.

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