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Market recovers from its lows, merely down 0.4% wow as volatility persists
Summary

After the resignation of former finance minister Asad Umar last week, the air of uncertainty persisted in the market over the issues of IMF loan, its term and conditions, the incoming budget and the fate of Amnesty Scheme. The Advisor to PM on Finance, Revenue and Economic Affairs Dr. Abdul Hafeez Shaikh showed competency and acted promptly to dispel the impression of any discontinuity in the finance affairs vis-a-vis IMF loan and budget making process.

During the week, the market traded in the 36,000 range, recovering to 37,000 level in the last day of week when it closed at 37,130.63 level. The market shed 162 points during the week. The average volume declined to 123m and the market capitalization dip by Rs.40 billion to close at Rs.7,529 trillion.

The market on Monday started with uncertainty as investors were worried about coming IMF program, which could hike the gas and electricity prices and ultimately the inflation. The fine-tuning of Amnesty Scheme asked by Advisor to FBR also worried the investor about the fate of Amnesty Scheme. The market shed 391 points to close at 36,901.69.

The doubts about IMF program and its non-acceptance of Amnesty Scheme created doubt in the minds of the investors. The market lost 498 points on Tuesday to close at 36,404.03. The volume too declined further to 120 million from 126m a previous day.

The week being corporate results week kept the market intact with some healthy earning results like Habib, United and MCB. The stock recovered 100 points to close at 36,504.25 points on Wednesday. The volume declined to 116m.

It was another volatile day on Thursday. The investors kept oscillating between some good corporate results and positive news flowing from Prime Minister’s visit to Iran and China and uncertainty about IMF package and Amnesty Scheme. The investor kept away from the market and volume further declined to 107m. It is to be observed that during all these four days foreigners were buyers to the tune of $10.25m.

The visit of Prime Minister Imran Khan to China on Friday added positively to stock exchange as beside signing important agreements with China Prime Minister met Managing Director IMF, Christine Lagarde and briefs World Bank CEO Kristalina Georgieva. The market climbed by 335 points to close at 37,130.60. The volume jumped by 35 percent to 144m.

 

Participants/Activity

On average shares of 330 companies were traded. Of these 141 were gainers and 170 were losers and 19 remained unchanged.

Foreigners were net buyer $9.33m during the week; companies were buyer by $3.06m, Banks were buyer $2.40m; mutual fund net seller $8.26m and individuals net seller $3.75m.

Volume leaders during the week were: Lottee Chemical 48m; Bank of Punjab 46m; Pioneer Cement 25m; Pak Elektron 23m; K-Electric Ltd 20m; Sui Northern Gas 17m; TRG Pak Ltd 15m; Maple Leaf, World Telecom and Unity Foods Ltd 7m each; Faysal Bank and Fauji Cement Co. 6m each.

Triggers
  • Amnesty Scheme to be reexamined as UMF not in favor of it. Dr. Abdul Hafeez Shaikh on Monday directed FBR to fine-tune the scheme to make it simple to understand and easy to implement.
  • IMF team coming to negotiate three-year bailout package on Monday (April 29) for economic reforms including the introduction of a single Value Added Tax (VAT) regime.
  • $500m framework for development projects signed with South Korea.
  • Under the new list of 313 items included in the second phase of China –Pakistan Free Trade Agreement (FTA), the country’s export earnings could increase by $500 million within a time span of 18 months.
  • Government sought expeditious approvals from the World Bank to ensure disbursement of about $1.5 billion project financing before the fiscal year ends on June 30.
  • Pakistan’s CAD lower than regional average but more volatile: UNDP.
Conclusion

The IMF mission is coming on April 29 to start negotiating the package deal. It will clarify many of the queries in coming days for investors and market could fluctuate accordingly. Government should now be well prepared to deal with IMF and World Bank under Dr. Hafeez Shaikh being ably supported in China by PM Imran Khan.

The government has an excellent plan to form a new body for effective policy implementation to merge Ministries of Commerce, Industries, Production and the Board of Investment to consolidate and integrate existing institutions at the federal level. The purpose is to enhance effectiveness of policy reforms and its implementations. It could accommodate some recent finance experience personnel.

Raees Uddin Khan,
Research & Development Institute of Securities Management Research & Training (Pvt) Ltd, Karachi.
Dated: April 27, 2019

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