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Stocks flourish on IMF loan approval but fail to sustain on gloomy political outlook
Summary

During the week International Monetary Fund’s loan was approved by the IMF board on July 3, 2019. And due to the program Pakistan will receive $6 billion in 39-month period under Extended Fund Facility to support the government’s economic reform program. While assets worth Rs 3 trillion have been declared by 137,000 people this week under the Asset Declaration Scheme 2019 with tax payment of Rs.70 billion but most of the declarants were new. On the political front, PML-N leader Rana Sanaullah Khan was held in narcotics case and PM Imran Khan expressed dissatisfaction over provision of A-class facilities in jail to former premier Nawaz Sharif and ex-president Asif Ali Zardari and questioned the issuance of production orders for the parliamentarians facing money laundering and corruption charges. The joint opposition decided to file ‘no-confidence motion in the senate on July 9 for the removal of Senate chairman from the office.

On the background of the above events the investors participation remained subdued and volume declined to average 86m from 146m last week. The stocks remained positive for first three days of the week on IMF approval but declined on last two days. Overall the Index gained 288 points to close at 34,190.02. The market capitalization improved by Rs.23 billion to reach Rs.6.910 trillion. The foreigners were buyer with $5.94m.

On Monday, the market was looking for direction as volume was at its lowest of 48m from 214m last Friday, news of Pakistan receiving the first tranche of $500 million failed to move the investors. The market had choppy trading with intraday high of 167 and low of 75,33. The Index settled at 33,996.33 with increase of 94.75.

Foreign buying continued on Tuesday by $2.78m while appreciation in the value of Rupee and lowering of the inflation rate for June 8.89 percent against the expectation of 9.50 percent pulled the KSE-100 Index by 310.78 points to close at 34,307.11.

On Wednesday, the approval of IMF loan extended the stocks gain by 589.44 to close at 34,896.55. The volume jumped from 91 million to 130 million.

On Thursday, the IMF euphoria died down and the investors opted for profit-taking. The market shed 325.93 point to close at 34,570.62. The volume declined to 112m.

Finally on Friday, the political noise in the market and the last day of the week, the investors preferred to remain on side line with volume declining to 51 million. The market declined by 389 points to close at34,190.02.

 

Participants/Activity

On average shares of 314 companies were traded. Of these 147 were gainers and 150 were losers and 17 remained unchanged.

Foreigners were net buyer $5.94m during the week; companies were buyer by $4.99m, Banks were seller $1.72m; Mutual fund net seller $2.62m and individuals net buyers $2.74m.

Volume leaders during the week were: Unity Foods 34m; Lotte Chemical 33m; TRG Pak Ltd 28m; K-Electric 23m; Maple Leaf 23m; Dolmen City 6m; Bank of Punjab XD 5m; Oil & Gas Development 2m and Silk Bank 1m.

Triggers
  • Credit off take in the outgoing fiscal year of June 21 fell by 1.7 percent to Rs.607.5 billion compared to Rs.618.2 billion during the same period last year.
  • Data released by Pakistan Bureau of Statistics, the CPI and WPI in June was recorded at 8,89 percent and 12,69 percent respectively as most of the essential items maintained an upward trend.
  • Traders association in Sindh and Punjab on Tuesday strongly protested against the ‘harsh’ budgetary measures including increase in taxes and documentation of business activities.
Conclusion

Technically, the Index is expected to retest 34,728 (30 DMA) followed by 50 DMA at 35,162 where a break above will extend the gain towards 36,537. A fall below 34,467 will cause the downward to 33,410 in sight.

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