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Stocks mislay 225 points since January’19 bullish rally
Summary

The new year 2019 came with a blessing for stock market investors. In January, the stock market recovered all the lost points of KSE-100 index during 2018. Since January 2019, the market remained positive and the index kept rising every week. The foreigners turned buyers and for the last three weeks they bought stocks worth around $31.50 million. The mini budget of 23rd January addressed most of the grievances of stock brokers. The flow of funds from the friendly countries resolved the balance of payment problem for the time being. BOP support of around $2.5 billion with China is being followed by Secretary of Finance recently. However, IMF loan uncertainty and Standard & Poor Global rating lowering long-term sovereign credit rating for Pakistan to ‘B-‘ from ‘B’ had negative impact on the market.

During the week the KSE-100 Index lost 225 points to close at 40,887.35 on Friday. The market capitalization lowered to Rs8.131 trillion from Rs8.170. The average volume improved to 191 million shares.

On Monday the market gained 501.68 to close at 41,614.39. The cement sector lead the rally on account of decline in international coal price D. G. Khan, Fauji, Maple and Cherat Cement hit their upper circuit. The volume increased to 254 million shares.

Tuesday was a National Holiday due to Kashmir Day.

The investors went for profit-taking after three continuous rallies in the stock market. The KSE-100 Index shed 108.71 points to close at 41,505.68. The volume too declined to 205m shares.

Profit-taking continued in the market for the next three days i.e. Wednesday, Thursday and Friday due to lackluster trading with low volumes. The stocks lost 109,173 and 445 points to close at 41,505.68; 41,332.75 and 40,887.35 respectively. The volume too declined to 205m, 138m and 169m.

Participants/Activity

On average shares of 361 companies were traded. Of these 147 were gainers and 199 were loser and 15 remained unchanged.

Foreigners were net buyers $12.17m during the week; companies were seller by $0.14m, Banks were buyer $1,47m; Mutual fund net seller 22.61m and individuals net buyers $5,26m.

Volume leaders during the week were: K-Electric 41m, Pak Int. Bulk 30m, PAEL 22m, Fauji Cement 18m, Bank of Punjab and Lottee Chemical 13m each, Azgard Nine 12m, Power Cement 11m; Maple Leaf 10m, D. G. Khan Cement and PIA (C) 9m each.

 

Triggers
  • SBP total liquid foreign exchange reserves increased to $8.192 billion as of February 1 up by $38.2 million. The total reserves were $14.885 billion up 0.56 percent.
  • Total cement sales – exports and local despatches – posted a meager growth of 1.67 percent to 26.765 million tonnes during the first seven months of the fiscal year mainly due to reduction in government spending on infrastructure projected.
  • PIA revival plan to be finalized by March.
  • The FBR reported a shortfall of Rs191 billion against the target projected for the first seven months of this fiscal year.
  • S&P cuts credit rating to ‘B-‘from ‘B’ for Pakistan.
Conclusion

As per discussion with IMF, Minister of State Revenue Muhammad Hammad Azhar stated that it is moving in positive direction. He did not specify time limit as it depends on IMF conditionalities. This means that before going for IMF program government intend to look at all angles or make all arrangements which is good for the country. Finance Minister seems to be a googly bowler of Imran Khan team who is unreadable at this stage. But surely stock market will not be tamed unless this IMF uncertainty is removed.

Raees Uddin Khan,
Research & Development Institute of Securities Management Research & Training (Pvt) Ltd, Karachi.
Dated: February 9, 2019

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