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KSE-100 index recovers 2,537 points after seven weeks of bearish spell
Summary

The stock market remained bearish for seven weeks since April 2 and lost 3,932 points to stage recovery this week by 2,537 points. The economic horizon become clear to investors as uncertainty about IMF program subsided. The IMF program is aimed at improving Pakistan’s public finances; reducing public debt and helping the country get back on the path to a sustainable, more inclusive growth stated by Gerry Rice, Director Communication Dept, IMF during a media briefing this week.

Ensuing actions by government by raising policy rate by150 bps to 12.25; currency appreciation during the week to close at around 151 to 151.50 in interbank market and open market respectively from average 144 and 146 last week; announcement of presenting Budget on June 11 and Government decision to launch fund to support beleaguered PSX worth Rs.20 billion brought clarity to investors.

The KSE-100 index climbed from three years low 33,166 level last Friday to close at 35,000 level to touch 35,703.81 a gain of 7.6% WoW. The average volume increased to 178m from 107m previous week. The market capitalization increased by Rs.394 billion to Rs.7.205 billion.

On Monday the market surprisingly did not jump up on announcement of Stock Exchange Fund by Advisor to Finance on weekend. The investors seemed worried about currency uncertainty and unexpected policy rate hike. The KSE-100 Index gained 83.92 points to close at 33,250.54.

Gradually on Tuesday investors started valuing hunting in anticipation of support fund. Buyers took position in state owned companies like OGDC, Sui Southern and Northern Gas Market gained 191.56 to close at 33,442.10 points. Surprising banking shares like HBL, MCB Bank Al Habib and NBP all closed in red zone. The volume declined to 154m from 165m.

On Wednesday there was a rally and stock gained 1,195.04 to close at 34,637.14. There was an anticipation of introduction of two funds-one government and other Islamic. The volume too jumped to 203m.

The Fund euphoria continued on Thursday and stocks gained 944.20 points to close at 35,581.34. The companies were major buyer worth $4.20 m. The volume increased to 228m.

On Friday the foreigners turned the major buyer worth $3.46m and the KSE-100 Index gained 122.47 points to close at 35,703.81. The government announced that budget for the next fiscal year 2019-20 would be presented in the National Assembly on 11th June.

 

Participants/Activity

On average shares of 338 companies were traded. Of these 189 were gainers and 135 were losers and 14 remained unchanged.

Foreigners were net seller $0.02m during the week; companies were buyer by $4.56m, Banks were buyer $0.77m; Mutual fund net buyer $3.05m and individuals net buyers$5.13m.

Volume leaders during the week were: Unity Foods 66m; K-Electric 59m; Bank of Punjab XD41m; World Call Telecomm 32m; Lotte Chemical 30m; TRG Pak Ltd 27m; Pak Int. Bulk 17m; Maple Leaf 17m; and Pak Elektron 6m.

Triggers
  • SBP on Monday raised its policy rate by 150 bps to 12.25.
  • SBP reserves dip $788m during the week ended May17 to $8.057 billion while commercial bank holding reached $7.068bn to total reserves at $15.126 billion.
  • FBR notifies rules for Amnesty Scheme to allow people for declaration of their undeclared assets, expenditure, and sales along with payment of taxes until June 30,2019.
  • Govt to launch fund upto Rs.20 billion to support PSX.
  • Fitch Solutions in its latest report states that SBP would hold interest rate at 12.25 percent through 2019 which would stabilize inflation while credit growth is likely to slow over the coming months.
  • Oil, gas reserves not found off Karachi coast: PM aide.
  • $3.2 billion Saudi oil facility to begin on July 1.
Conclusion

Announcing the SBP’s first Monetary Policy statement Governor Dr. Baqir stated: “The IMF program is designed to restore macroeconomic stability and support sustainable economic growth, and is expected to unlock considerable additional external financing.”

With the statement of Governor about macroeconomic stability, sustainable growth and additional external financing and Finance Advisor decision to launch Rs20 billion PSX fund, the bad days of stock exchange seems to be over.

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