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Volatile market turns positive on finance minister resignation and cabinet reshuffle
Summary

Asad Umar Finance Minister, decided not to be Yegor Gaidar and tendered his resignation on Thursday to Prime Minister Imran Khan. Many Russians believed Yegor Gaidar to be responsible for economic hardships and mass poverty in Russia in 1990s due to his reforms.

Other major news which griped the market beside cabinet reshuffle were: IMF Mission to arrive any time soon before the end of April, postponement of Amnesty Scheme, government proposal to introduce the Treasury Single Account to shift deposits of various government departments and organization with State Bank of Pakistan (SBP) and arrival of corporate results season.

During the week, the market remained flat and KSE-100 Index shed 45.40 points to close at 37,292.47. The average volume increased to 176m this week while market capitalization declined by 73 billion to Rs.7.569 trillion.

All went well with the Finance Minister returning happily after IMF meeting and World Bank, Asian Development Bank briefing about reform process last week. The stock market accordingly opened on high hopes and gained 166.21 points. The development of amnesty scheme also brought positivity in the market. The KSE-00 Index closed at 37,504.06.

After a three-day rally the investors on Tuesday focused more on results and profit-taking. The KSE-100 Index lost 122,13 points and close at 37,381.95. The volume declined to 140 million shares.

The news of the Treasury Single Account on Wednesday was disastrous for the investors. It seems to be the requirement of IMF but failed to be implemented in 2009-10. Stocks plunge 629 points to close below 37,000 to 36,753.57. The volume increased to 173 million.

On Thursday, April 18 announcement of lone press conference by Asad Umar resignation had a positive impact on the market. KSE-100 Index added 59.29 points to close at 36,811.86.

On Friday, the investors focused more on value hunting as market is quite attractive at this level. The investors acted positively with quick change of economic team with an experienced finance man Abdul Hafeez Sheikh. Beside the news of SBP delaying TSA (Treasury Single Account matter further added 480.61 points to close the market at 37,292.47.

 

Participants/Activity

On average shares of 341 companies were traded. Of these 152 were gainers and 171 were losers and 18 remained unchanged.

Foreigners were net seller of $1,91m during the week; companies were buyer by $4.58m, Banks were buyer $0.47m; Mutual fund net seller $5.07m and individuals net buyers$2.26m.

Volume leaders during the week were: Bank of Punjab XD 146m; Unity Foods (R) 92m; Pak Electron 50m; K-Electric Ltd 41m; Maple Leaf 14 m; Unity Foods Ltd 13 m; Fauji Cement 12; Lotte Chemical 18 m; World Telecom Ltd 8m; TRG Pak Ltd 8m and Pioneer Cement 7m.

Triggers

– Trade and industry leaders all said that the departure of the finance minister at this critical juncture was ill-timed though many raised questions about his performance.

– Matter of Amnesty Scheme deferred to next Cabinet meeting for further deliberation.

– The government is still examining a proposal to introduce the Treasury Single Account (TSA) to shift deposit of various governmental and organization with the SBP.

– Government pays $1 billion against Eurobonds of the total $2 billion raised in April 2014.

– Reserves dip by $1.028 billion to $9.244 billion during the week ended April 12.

Conclusion

Asad Umar, the resigned finance minister, still consider himself as part of PTI and Imran Khan’s team. His resignation is still not accepted by Imran Khan and his name is appearing in government notification on 19th April. Asad Umar, being an MBA who is trained as ‘Generalist’ is now provided by an ‘Specialist’ , Economist and Experienced as Finance Minister, Budget making and dealing with IMF and International agencies like WB, ADB could make a wonderful finance team for Pakistan.

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