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Stocks score remarkable dip as volatility keep investors on their toes
Summary

The week ended was an eventful week. The flow of news and information both positive and negative kept the investors on their toes. The KSE-100 Index during the week stooped to its three years low of 36,579 on Wednesday .

This week movement of markets on the following directions which include: the big bang revelation of IMF’s “without reforms, Pakistan’s growth rate to remain at 2.5 percent till 2024”; Foreign Minister warning “India plans to attack Pakistan anytime soon”; Government takes major step to meet FATF requirements; Finance Minister confirm to launch Tax Amnesty scheme; Finance Minister Asad Umar before going to Washington D.C this week to finalize IMF program, announced to deliver on Medium Term Economic Framework (MTEF 2019 -23) targets to be finalized by the IMF later this month; and trade deficit dips 14 percent to $23.4 billion in nine months.

The KSE-100 Index shed 0.5% WoW to close at 37,337.87 on Friday. The average volume was 148m with market capitalization decreased to Rs.7,642 billion – a decrease of 48 billion.

On Monday the KSE-100 Index shed 599.90 points to close below 37,000 level to 36,921.91. IMF in its latest report “World Economic Outlook (WEO), Growth Slowdown Precarious Recovery” states that in the absence of further adjustment policies in Pakistan growth projected to remain subdued at about 2.5 percent, with continued external and fiscal imbalances weighing on confidence. The volume increased to 107 million.

On Tuesday there was recovery of 208.06 points to close the Index at 37,129.97. The improved economic date on trade deficit indicating down $3.84 billion in July-March period, is estimated in the July-March period is in range of $5-6 billion at the ending of ongoing fiscal year. The volume improved to 161 million.

On Wednesday there was a meltdown in the market as the Index lost 550 points to close at three low of 36,579.32. Some attributed this to Finance Minister statement that the country had two options – either go to IMF or go bankrupt which exacerbated the investors fear.

On Thursday the market gained 208.32 points to close at 36,787 points. The start of talks with the IMF on the sidelines of the World Bank, which had also predicted less than 3 percent growth, provided comfort to investors.

On Friday the market gained 550.23 points to cross 37,000 level to close at 37,337.87. The news of Securities and Exchange Commission of Pakistan (SECP) Policy Board giving approval of bailout fund with contribution from state-owned institution to avoid the danger of being downgraded to MSCI Frontier Market from emerging in the next review due in June.

 

Participants/Activity

On average shares of 348 companies were traded. Of these 147 were gainers and 180 were losers and 21 remained unchanged.

Foreigners were net seller $2.18m during the week; companies were buyer by $3.64m, Banks were buyer $3.96m; Mutual fund net seller $3.42m and individuals net buyers$1.84m.

Volume leaders during the week were: Unity Foods Ltd 71m; K-Electric 59m; WorldCall Telecom 47m; Fauji Cement 42m; Maple Leaf 39m; Bank of Punjab XD 31m and TRG Pak Ltd 18 m.

Triggers
  • The country received $16.096 billion in remittances during the first nine months of this fiscal year higher by 8.7 percent from $14.80 billion in the same period last year.
  • SBP reserves fell by 169 million to $17.228 billion during the week ended on April 5, 2019.
  • IMF forecast Pakistan’s fiscal deficit continuously elevated to close to 8 percent and debt-to-GDP ratio to reach 86 percent over the next five years.
Conclusion

The week ended has brought the KSE-100 Index to its lowest level of 36,579 on Wednesday. Former PSX Chairman Mr. Arif Habib consider this level as an opportunity to buy.

The uncertainty about IMF program seems to be over. Mr. Asad Umar’s team has prepared long overdue Medium Term Economic Framework 2019-23 to give clarity and shape to the economy. It will be discussed and approved by the IMF to bring transparency and direction by the end this month as expected. Finance Minister has also apprised World Bank, ADB about reform process.

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