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Vagueness over Chinese and IMF packages keep bulls away, index declines by 1.5% wow
Summary

Lack of preparedness and planning over the Chinese and the International Monetary Fund (IMF) packages on the part of the government was badly exposed to the investors in stock exchange and the market turned bearish this week. The market had a climb of 3.57% last week with the expectation of PM’s China trip.

There was lack of clarity in negotiations about the bailout package with IMF. It still need to be worked out with Chinese package about how the export doubling to China with $2.2 billion during 2018-19 will overcome the trade imbalance with China of around $14 billion import from China? The proposal to trade through a yuan-rupee swap arrangement still to be discussed by Pakistan delegation going to China on 9th November. It is assumed that this arrangement will release pressure on our dollar reserves.

During the week there was a decline of volume by around 28% to average 233 million shares. The market capitalization decreased to Rs8.223 trillion. The foreigners remained net seller by $9.45m.Overall the market shed 615 points to close at 41,388.88.

The market on its opening on Monday went for a correction over last week addition of 1,448 points to its KSE-100 Index. The investors went for profit-taking and the KSE-100 index shed 510 points to close at 41,493.97. The volume too declined by 27% to 214m.

On Tuesday after the return of Prime Minister Imran Khan from China, immediate clarity on the Chinese package was not available. The market further went for correction and shed 535 points to close KSE-100 Index to 40,958.53.

However, the stock market turned bullish on Wednesday as in a joint press conference, Finance Minister Asad Umar stated that immediate balance of payment crises of $12 billion was over for Pakistan. The KSE-100 Index added 585 points to close at 41,543.98.

On Thursday the investors decided to be cautious. The IMF negotiation started on Wednesday which shall ultimately determine the size of assistance. The delegation of Pakistani expert for Beijing will discuss modalities of Chinese assistance and ultimately determine the Chinese package are of investors concern. The KSE-100 Index lost 177 points to close at 41,367.38.

The last day Friday, remained a dull day for trading at Stock Exchange. The volume too declined 220m and KSE-100 Index added 21.50 points to close at 41,388.88.

 

Participants/Activity

On average shares of 364 companies were traded. Of these 161 were gainers and 185 were losers and 18 remained unchanged.

Foreigners were net seller with $9.45m during the week; companies were buyer $0.23m, Banks were buyer $0.19m; Mutual fund net seller $4.56m and individuals net buyers $7.98m.

Volume leaders during the week were: Bank of Punjab 106m; TRG Pak Ltd 63m; Lottee Chemical 59m; Engro Polymer 58m, K-Electric Ltd 56m; Pak Elektron 41 m; Siddiqueson Tn 37m; Shabbir Tiles XD 12m and Unity Foods Ltd 11m.

Triggers
  • Reserves held by the SBP decrease by $98 million to $7.68bn as on Nov 2
  • Engro Polymer Chemical secures US35m from IFC.
  • Shabbir Tiles and Ceramics Ltd is planning to invest Rs.0.5 billion in addition to Rs.1.25 billion announced earlier.
  • China has agreed to increase its imports from Pakistan to $.2 billion by end of 2018-19 from the existing level of $1.2 billion and to $3.2 billion by the end of next fiscal year.
Conclusion

Richard Morin, CEO of Pakistan Stock Exchange saw tremendous opportunities for investors, where they could buy PSX equities, specially KSE-100 Index stocks at a very attractive price. According to Mr. Morin Pakistani investors only pay Rs7.6 per rupee of annual profit earned by these companies whereas investors elsewhere in the region are paying Rs.14 per rupee of annual profit.

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