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Ambiguity and political noise led to fall of index by 2.8pc wow
Summary

Different versions on IMF bailout package by government officials along with hurried progress on accountability cases in courts led to confusion along with uncertainty of economic and political system in the minds of stock investors. Events are happening so rapidly keeping the investors baffled about its outcome. The stock fundamentals of the market seemed to be subdued. The investors in such a situation is keeping away from the market as is evident with low level participation in terms of volume trade value and declining Index for the last three weeks inclusive this week.

During the week the average volume was 110m, market capitalization declined by Rs.99 billion to Rs.6,682 trillion and KSE-100 Index shed 1,084 points.

On Monday the market gained 57.88 points. The KSE-100 Index went to high of 38,336.68 and low of 37,936.89 to closed at 38,308.92 with a gain of 57.88 points. The market dipped 317 points on the news of former prime minister Nawaz Sharif sentenced 7 years for corruption.

Tuesday the market remained closed due to birth anniversary of Quaid-e-Azam Mohammad Ali Jinnah and for Christmas.

KSE-100 Index shed 90.85 points on Wednesday to close at 38,218.07. There was no significant trigger in the market and the there seems to be stalemate in talks with IMF. The political temperature was rising on the fake account case. The drop in oil prices brought exploration and production stocks in the red. Rumors of increase in cement prices in North could not make impact in the market.

On Thursday, the Cabinet decides to add 172 names including former president, Asif Ali Zardari to ECL, the Index lost 364.50 points. The Index closed below 37,000 for the first time since October 24 at 37,853.57.

The market remained volatile due to rollover week on Friday with Index touching low of 36,918. The KSE-100 Index finally closed at 37,167.02 dropping by 686.55.

Participants/Activity

On average shares of 343 companies were traded. Of these 125 were gainers and 195 were losers and 23 remained unchanged.

Foreigners were net sellers $1.12m during the week; companies were buyer by $3.59m, Banks were buyer $4.57m; Mutual fund net sellers $6.2m and individuals net buyers $2.93m.

Volume leaders during the week were: K-Electric 31m; Pak Electron Ltd 25m; Bank of Punjab 23m; Bank Alfalah Ltd 18m; Lottee Chemical 13m; Fatima Fertilizer 10m; Aisha Mills Ltd 9m; TRG Pak Ltd 5m; Sui Northern Gas Ltd and Dost Steel Mills Ltd 4m.

 

Triggers
  • Government raises Rs.19.668 billion from the auction of long-term Pakistan Investment Bonds (PIB) against the target of Rs.50 billion.
  • The foreign exchange reserves of SBP fell by $591 million to $7.457 billion on Dec.21.
  • Regulator allows maximum loss claims to SSGC and SNGPL.
  • Cabinet approves plan to float yuan-denominated ‘Panda bonds upto $2.2 billion.
  • Traders blame lack of awareness for slow response to yuan-based settlement.
  • PM Imran Khan has approved Air Sial flight operations from 2019. Air Sial is established under the supervision of Sialkot Chambers of Commerce & Industry.
Conclusion

During the week the Index touched 36,000 level, with low of 36,919 indicating market consolidation with last day of year’s trading on Monday, Dec 31, 2018. The stocks are at very attractive price to buy at this level according to some brokers.

The quarterly period of Sept-Dec, the Index is down around 17 percent in dollar terms representing its worst performance since 2008 crises. In rupee terms it would be the third worst performing quarter in 10 years.

The government is making hectic efforts to uplift the country’s economy weighing pros and cons of all economic decisions. The bailout impasse with IMF as told by government official has three tough conditions vis-a–vis free float exchange rate across the board; 22 percent increase in power tariff to address the issue of circular debt; and full disclosure of the financing details of all China Pakistan Economic Corridor ( CPEC ) projects; increase in boosting exports, enhance investment increase in remittances and wealth creation. Besides the issues of brokers on over taxation and overburden with number of audits to be worked out by government to boost the market.

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