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KSE-100 index kept falling 589 points in the first week of March
Summary

After a journey of continuous declining stocks in February, the index loses 1.5% WoW during first week of March on thin volume.

During the week the efforts of de-escalation of war through diplomatic channels along with visit of Saudi Foreign Minister and decline in Pak-India skirmishes along the line of control did pacify the situation. Government decisive crackdown on militant as JeM chief’s son, brother among 44 were taken into ‘protective custody’. Nonetheless, investors seem to have apprehension as news like Indian submarine stopped from entering Pakistani waters create doubt in the mind of investors. The index could not pick up during four days of trading.

In the meanwhile, the government went on carrying their reform agenda of economy as the mini-budget was passed amid opposition’s protest and boycott. Government took steps to avert grim FATF prospect by empowering seizing agencies to immediately freeze/seize bank accounts and other immovable properties of individuals and entities sanctioned by the UN Security Council. The first Pakistan Energy Sukuk of Rs200 Billion was successfully closed. Also Prime Minister planned to create ‘new’ FBR if reforms cannot be taken.

During the week Index shed 589 points to close at 38,950.23. The average volume declined to 114 million share while market capitalization had a fall of Rs100 billion with Rs.7.986 trillion as on Friday. Like last week foreigners were again net seller this week by $3.47 million.

Participants/Activity

On average shares of 345 companies were traded. Of these 133 were gainers and 188 were losers and 24 remained unchanged.

Foreigners were net seller $3.47m during the week; companies were buyer by $3.51m, Banks were seller $1.42m; Mutual fund net seller $10.62m and individuals net buyers $5.14m.

Volume leaders during the week were: Bank of Punjab 192m; K-Electric 20m; World Telecom 12m; PSX, Nishat (Chunian) and TRG Pak Ltd 7m each; Siddiquesons Tin, Pak Elektron and Unity Foods 6m each; Pak. Int Bulk 8m; Descon Oxychemical XD 4m; Inter Steel Ltd, Fauji Cement and Maple Leaf 3m each.

On Monday the market acted on positive expectation of possible IMF deal worth $12 billion and the decline of Pak-India skirmishes at LoC and floatation of Rs.200 billion Sukuk. Index gained 210.73 points to close at 39.749.75. Commercial Bank performed very well during the day on expectation of SBP hike in rate as inflation increased to 8.20 percent in February.

 

The investors opted for profit-taking on Tuesday as the Index shed 61.24 points to close at 39,688.51. Low value scrips like Bank of Punjab, K-Electric and Nishat Chunian remained volume leader.

There was thin trading on Wednesday as it dipped to 81 million from 164 million on Tuesday. The Index declined by 120.41 points to close at 39,568.51. The banking sector was in limelight followed by cement sector DGKC, FCCL, MLCF and LUCK.

The volume continued to be thin with slight improvement to 83 million on Thursday. The Index declined by 274 points to close at 39,294.19. The automobile sector was the major gainer as the passage of mini-budget confirmed removal of restriction against non-filers for purchase of locally assembled car.

There was thin trading on Friday as the volume declined to 74 million on Friday, lowest of the week. The day trading was volatile with intraday low of -427. Cement and E&P sector came for a beating. The Index declined by 343.87 points to close 38,950.23.

Triggers
  • Reserves held by the SBP increased by $80 million to $8.17 billion during the week ended March 1.
  • China commits $1 billion for 20 social sector projects.
  • Pakistan received $2,32 billion during first half (July-December) of the current fiscal year apparently due to inability of government to secure an umbrella support from IMF.
  • Power sector pulls back from the brink as government clears Rs.200 billion receivables.
  • Finance bill ushers in sweeping ‘incentives’ for banks , industry and greenfield investors.
  • Two Chinese groups to invest $2 billion in housing sector.
Conclusion

Technically break above 39,955 will target 40,252 and 40,674. The support and resistance are at 39,479 and 39,899.

Raees Uddin Khan,
Research & Development Institute of Securities Management Research & Training (Pvt) Ltd, Karachi.
Dated: March 8, 2019

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