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Foreign selling and low volume push index below 39,000-level
Summary

A mix of positive and negative news in the market kept the KSE-100 Index balanced as it remains flat with rise of 24 points during the week to close below 39,000 level at 38,585.66 on Friday.

The positive news included: Meeting on last Sunday by PSX delegation with the Prime Minister; another $1 billion Saudi Arabian deposit arrives in State Bank of Pakistan (SBP) account; US wants to help Pakistan protect its economy; ADB unveils $7.5 billion business plan for Pakistan; Remittances jump over 12 percent in five months. The negative news were: Moody’s warning of growing debt risks, as its reaffirms rating of B3 negative; Exports register 6.4 percent decline last month and Fitch Ratings downgrading Pakistan default rating to B- from B.

The foreigners remained seller throughout the week with outflow of $12.87m and average volume declined to average 121m hitting six months lowest at 84m on Thursday. The market capitalization decreased by Rs24 billion to Rs7,758 trillion.

The first day of week Monday, the stock market started on an upbeat note after the meeting of brokers and prominent businessman with the Prime Minister on Sunday at Governor House Karachi. An understanding was reached on following: 1) Advance Tax of 0.02 percent and sale of share (both sides) to be reduced to 0.01 percent; 2) allow carry forward of capital losses upto 3 years; 3) Rationalization of Taxation of Holding Companies on inter-corporate dividend; 4) Rationalization of Capital Gain Tax Equities in line with real estate in next budget; 5) Promote listing of government & CPEC projects debt at PSX; and 6) Help curtail over regulation over brokers. The market shot up 738 points and the Index closed at 39,299.63.

On Tuesday the market went for profit-taking as it shed 447.67 points. The foreigners were seller worth $3.75m. The Supreme Court removal of ban on construction of high-rise building Karachi boosted cement share reflecting 30 percent turnover. The KSE-100 Index shed 447.67 points to close at 38,851.96.

The market remained bearish on Wednesday and shed 544.52 points to close at 38,307.44. The upcoming of FTSE rebalancing and uncertainty over IMF negotiation kept investors cautious.

On Thursday the market hit six-month lowest volume of 84 million shares. The Sui Southern & Northern Gas hit lower circuit on outlook of economy with the shortage of natural gas. The market declined by 295.81 to close at 38,011.63.

The market took an upward stride on Friday on the news of Pakistan receiving $1 billion into its SBP account from Saudi Arabia. Also Asian Development Bank (ADB) to provide $284 million for power transmission raise the Index by 574.03 to close at 39,585.66.

 

Participants/Activity

On average shares of 345 companies were traded. Of these 138 were gainers and 181 were losers and 26 remained unchanged.

Foreigners were net seller $12.87m during the week; companies were buyer by $2.60m, Banks were seller $1.74m; Mutual fund net seller $5.62m and individuals net buyers$7.18m.

Volume leaders during the week were: K-Electric 63m; Pak Electron 35m; Bank of Punjab 21m; Engro Polymer 18m; TRG Pak Ltd 13m; Lottee Chemical 12m; Maple Leaf & Amreli Steel XD 9m each; Siddique Sons Tin 7m; World Telecom 6m, TRG Pak & Sui Northern Gas Pipe line 5m each.

Triggers
  • Remittances jump over 12 percent in current five months to $9.028 billion from $8.021 billion in same period last year.
  • Car sales show marginal growth of 87,897 in the first five months of this fiscal year from 87,273 in same period last year.
  • Government expecting up to $ 2 billion inflows through PTCL privatization.
  • ADB unveils $7.5 billion business plan for Pakistan.
  • Second tranche of $1 billion released by Saudi Arabia.
  • Fitch downgraded Pakistan’s long-term foreign currency rating to B-from B.
Conclusion

Technically the Index has crossed resistance of 38,465 and could lead to upward correction. Any downside will find support at 37,767.

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