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Uncertainty looms over IMF talks as stocks remain bearish
Summary

Stocks keep on falling on 6th consecutive week as reforms and IMF bailout package yet to be finalized at the end of the week.

Mr. Shabbar Zaidi was appointed FBR Chairman. Mr. Asad Umar, the former Finance Minister, was made Chairman of National Assembly’s Standing Committee on Finance. Dr. Reza Baqir assumes charge as State Bank of Pakistan (SBP) Governor for a period of three years. With Dr. Hafeez Shaikh already appointed as Advisor on Finance to the PM, the batting order seems to be complete but IMF game plan for the economy is still to come out.

In the absence of clear cut bailout package to be announced, market is reacting to rumors and grape vine and is in downward pause mode. Investors do not move forward to uncertainty. Government budget making process is delayed to after Eid. Upcoming MSCI review is on May 13, Financial Action Task Force meeting on 14th and the possible SBP monetary policy on 31st May.

Due to the shortened Ramazan timing and uncertainty, the average volume declined to 73m and the index shed 1406 points (3.9 % WoW) to close at its year lowest of 34,716.53 points. The market capitalization decline by Rs.246 billion to Rs.7.126 trillion. The foreigners were net buyers with $17.59m while Mutual Fund were seller to the extent of $10.7m.

Internationally it was doomsday for stocks on Monday. Dow Jones Industrial Average was down 239.12 points, S& P 500 down 29.29. The pan-European STOXX 600 index ended 0,9 percent. China major stock fell. The blue-chip CS1300 index and Shanghai Composite index both tumbled more than 5 percent. The reason being US President Donald Trump’s tariff to Chinese goods. In Pakistan KSE-100 Index shed 517.53 to close below 36,000 mark at 36,605.42. Traded volume increased by 11 percent from the previous session to 71 million.

Ramadan started on Tuesday with good news of overall gain in Index by 25.64 points to close 35,631.06. Major contribution to the Index came from banking sector as SBP auction calendar which target borrowings of up to Rs4.7 trillion from private banks in May-July. The volume declined to 65 million.

On Wednesday the market plunge 596 points as Mutual Fund were seller by $4.35m. The index closed at 35,035.03.

There were rumors in the market regarding IMF conditionalities like hike in interest rate by 100-200 bps, exchange rate to be around 160-165 by end of Dec 2019 & sales tax to rise to 18 percent. This kept market bearish and index on Thursday declined by 147.39 to close at 34,887.64.

The declining trend for stock continued on Friday as there was no news about IMF package on Friday. KSE-100 Index shed 171.11 points to close at lowest of the year to 34,716.53. The volume too declined to 39 million.

 

Participants/Activity

On average shares of 307 companies were traded. Of these 78 were gainers and 210 were losers and 19 remained unchanged.

Foreigners were net buyer $17.59m during the week; companies were buyer by $1.08m, banks were buyer $2.74m; Mutual fund netseller $10.7m and individuals net seller $5.30m.

Volume leaders during the week were: K-Electric 35m; Maple Leaf 24M; Sui Northern Gas 13m; Bank of Punjab XD 11m; Unity Foods Ltd and Lotte Chemical 6m each; Pak Int. Bulk and WorldCall Telecom 4m each; Fauji Cement, Hub Power (R) and Engro Power XD 3m each; United Bank XD and Searle Co 2m each.

Triggers
  • Remittances received by the country jumped by 8.45% to $17.87 billion in 10 months of this fiscal year.
  • The country’s foreign exchange reserves jumped by $230 million to $15.972 billion as on May 3. SBP forex holding increased by $179 m to $8.984 billion.
  • Govt borrowed Rs.1,073bn during July-April (26 April) as against Rs.850 billion in corresponding period last year representing an increase of 26.2 percent.
  • Federal budget to be presented after Eid holidays (June 11, 2019).
Conclusion

The government has completed its overall Head Fixing at the institute level. The IMF package should be available to public to clear all the speculations and rumors to smoothen out the market which is now standing at its lowest.

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