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KSE-100 Index keeps declining in february, shedding 1% wow
Summary

The stock market which started the month of February with KSE-100 Index at 41,113 kept on declining and stood at 40,487 on 15th February. There is an acceleration of positive and negative triggers in the market, both on economic as well as on political front, baffling the minds of stock investors.

The meeting of the Prime Minister with the Managing Director of International Monetary Fund (IMF) on Sunday created an impression of deal with IMF which was dashed by Finance Minister later with the statement: “Meeting of PM, Imran Khan was not a negotiation round and no deal was reached between the two sides.” Meanwhile, the visit of Crown Prince Mohammed bin Salman of Saudi Arabia with the economic package of eight MoUs were widely discussed during the week. On the political front leader of the opposition in the National Assembly Shahbaz Sharif was granted bail while bails of Asif Ali Zardari and Ms Faryal Talpur were extended to March 6. Moody’s changed Pakistan banking system outlook to B3 negative. Fiscal deficit to cross 6.3 percent of GDP this fiscal year while CDNS collected Rs.175 billion in seven months against a yearly target of Rs.224 billion. SBP reserves went up by $13.4 million as on Feb 8.

During the week KSE-100 Index lost 400.68 points and the average volume declined to 135m with market capitalization going down to Rs8,042 trillion. Noteable was continuous buying by foreigners to the tune of $12.1 million during the week.

On Monday the market declined with Finance Minister clarification of no IMF deal and the index closed at 40,326.53.

There were mixed sentiment in the stock market on Tuesday and index lost 37.13 points to close at 40,506.98.

On Wednesday there was a choppy session with intraday high of + 243 points and low of -112 points. The KSE-100 Index closed at 40,544.11 shedding 52.17 points.

The declining index on Thursday and Friday were supported with some positive statistics about export/import, remittances and foreign exchange improvements. The Index closed at 40,506.98 and 40,486.67 respectively.

Participants/Activity

On average shares of 337 companies were traded. Of these 131 were gainers and 188 were losers and 18 remained unchanged.

Foreigners were net buyer $12.1m during the week; companies were seller $4.69m, Banks were buyer $1.25m; Mutual fund net seller $2.83m and individuals net buyers $5.93m.

Volume leaders during the week were: K-Electric 46m; Lotte Chemical 36m; Azgard Nine 34m; D. G. Khan Cement 23m; Fauji Cement 19m; Pak Elektron 15m; Maple Leaf 14m; World Telecom 13m; Soneri Bank 12m; Bank of Punjab 11m; Unity Foods Ltd 8m; Dewan Motors 8m; STCL 5m and Al Tahur 3m.

 

Triggers

– SBP total liquid foreign exchange reserves increased to $8.205 billion as of Feb 8, up by $13.4 million. The total reserves of the country to $14.895 billion up 0.07 percent.

– Moody’s cuts banking sector outlook in Pakistan (B3 negative) to negative from stable. “Over the next 12-18 months, banks in Pakistan will see their credit profiles challenged by their high exposure to the country’s low-rated sovereign debt and a slowing economy, remarked senior vice president of the rating agency.

– Pakistan are expected to sign eight memoranda of understanding of over $10 billion during the coming week visit of Saudi Crown Prince Mohammed bin Salman (MBS).

– January data brings sharp fall in trade deficit. In January the trade deficit dipped to $2.46 billion from $3.6 billion in same month last year. The decline in imports was steeper by 19.14 percent to $4.5 billion as against $5.57 billion over the corresponding month in 2018.

– Remittances maintain momentum to $12.77 billion during the seven months of the current fiscal year up 12 percent from $11.38 billion received during the same period last year.

– The Central Directorate of National Savings (CDNS) has collected Rs.175 billion during first seven months of the current fiscal year against a target of Rs.224 billion for the current year.

– Fiscal deficit to cross 6.3 percent of GDP for the current fiscal year against the target 5.1 percent set in September.

Conclusion

Upcoming visit of Saudi Arabia Crown Prince has built up high expectation for the country, boosting the stock market. The SBP foreign exchange remained steady at $8.2 billion since the past three weeks. The foreigners remained buyer for the last four weeks in the stock market adding $53.58m.

The time has come for a clarity about IMF package. It will go a long way in attracting greater response from global financial market and from World Bank and Asian Development Bank (ADB) to finance structural reforms.

Raees Uddin Khan,
Research & Development Institute of Securities Management Research& Training (Pvt) Ltd, Karachi.Dated: February 15, 2019

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