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Economic concerns keep investors anxious as market stays bearish
Summary

The government’s hectic efforts for the stabilization of the economic situation for the country where in Prime Minister visited UAE and Malaysia for economic solution during the week and inconclusive talks with the IMF created uncertainty for the stock investors. The market remained bearish and shed 791 points and the volume declined by 26% to an average of 157 million. The market capitalization too decreased to Rs.8.096 trillion.

The news of receipt of $1 billion from Saudi Arabia for balance of payment support created only positivity in the market and on Tuesday KSE100 Index gained 66.47 points. All other days the market remained bearish.

The stock market on Monday dipped 308 points to close at 41,352.77. It seems to be in reaction to two important news: The Prime Minister’s Imran Khan visit to UAE did not yield any financial assistance for Pakistan like that of Saudi Arabia while US President’s statement “They (Pakistan) don’t do a damn thing,” created a hostile attitude of US towards Pakistan.

On Tuesday the market remained dull and the volume declined to 167m. There were mixed sentiments in the market over harsh conditions set up by IMF while credit of $1billion on Monday was positive for the market. The KSE-100 Index gained 66.47 points to close at 41,419.24. Chemical, exploration and production, tobacco and fertilizer contributed positive to the index.

There was no trading on Wednesday as the market remained closed due to Rabi ul Awal.

The news of IMF failed to reach agreement brought stocks down by 545 points to close at 40,874.03 on Thursday. The requirements of IMF emerging from IMF talk were: increase in revenue collection by 19 percent, further devaluations of Pak Rupee against dollar, double-digit discount rate, raise in power tariff and transparency in China loan portfolio.

Friday remains a cautious day for stock investors as they want to protect themselves from some unpleasant happenings during the weekend. This Friday the militant attack on Chinese consulate kept the stock investors more cautious. The volume decreased to 124m and the market remained flat down 4.75 points. The KSE-100 index closed 40,869.28.

Participants/Activity

On average shares of 361 companies were traded. Of these 137 were gainers and 205 were losers and 19 remained unchanged.

Foreigners were net seller $11.60m during the week; companies were seller by $3.0m, Banks were buyer $4.05m; Mutual fund net buyer $2.37m and individuals net seller$0,22m.

Volume leaders during the week were: Lottee Chemical XD 46m; Pak Electron 28m, Engro Polymer, Nimir Resins 27m each; Siddique Sons Tin 21m; Dost Steel Mills Ltd 15m; Poly Gen Power 10m; TRG Pak Ltd 9m; Dewan Cement Ltd 8m; Maple Leaf Cement 7m; Pal Intl Bulk and D. G. Khan Cement 6m each.

 

Triggers
  • $1bn received from Saudi Arabia on November 19, which raised SBP reserves to $8.294 billion. It was $$7.286 billion after a decrease of $196 million on November 16.
  • Khalid Mirza, former chairman SECP and Competition Commission of Pakistan made head of SECP Policy Board.
  • The Federal Cabinet on Friday appointed Arif Usmani as President of NBP.
  • Dollar hits record high in open market on Friday at 135.30 after a supply side restrained which according to some analyst claimed that IMF has asked the government to depreciate rupee further. The interbank rate max 134.15.
  • The Economic Coordinating Committee allowed cotton imports from Afghanistan and Central Asian states via Torkham border.
  • FBR seeks to tax smuggled mobile phones.
Conclusion

The government seems to be in no hurry to jump into for IMF program. Finance Minister Mr. Asad Umar clarified to the Parliament about IMF discussion. Prime Minister Imran Khan will discuss IMF conditions on Sunday along with his interactions with leaders of China, Saudi Arabia, UAE and Malaysia with Economic Advisory Council.

The country seems to go for a bailout with IMF which seems obvious from government’s actions but on its own conditions and expectations.

Once there is clarity in the market on these issues and subsequent policy adjustments in the government working, the market will go in positive direction.

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