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Stock Watch

Stocks plunge 518 points on rising economic, political concerns
Summary

The IMF Staff Level Report approved by the Fund Executive Board on July 3, 2019 and uploaded on website has some warning notes for the economic managers of the country to implement its program and take necessary step for successful completion which is a source of concern for the investors.

Regarding FATF challenge potential blacklisting could result in freeze of capital inflow while government is required to evolve consensus in Senate for approval of needed legislations according to IMF.

The political scenario developing in the country with No-trust resolution against Senate chairman by the opposition’ No production order for those parliament members who are under NAB custody while Judge seeking legal action on video scandal have brought government and opposition in a confrontational mode .The documentation of the economy and CNIC requirement have called a nationwide strike by the traders.

The investors shied away from stocks market and the volume hits seven-year low of 39.5 on Thursday. During the week, the average volume was only 51 million compared to 86 million last week. The market capitalization decline by Rs.105 billion to clock Rs.6,805 trillion. The KSE-100 Index shed 517.53 points to close at 33,672.49 on Friday. The foreigners, however, remained buyer throughout the week with total of $5.89m.

On Monday, the stock extended its losses for third consecutive day by 447.34 to close at 33,742.68. The investors seemed worried about further slowdown of economy after approval of the IMF loan of $6 billion bringing more hardship for the economy.

Stocks rose 112.90 points after three consecutive days decline to close at 33,855.58. The investors went for value hunting as market has come down for very attractive level.

On Wednesday, there was modest decline of 15.53 due lack of any trigger in the market and investors remained concerned with political development.

On Thursday, the stock opened in positive and closed with gain of 35.35 at 33,875.40. The volume hits the seven-year low volume of 39.5 million.

There was expectation on Friday of rate hike in the market on announcement of monetary policy on July 16, however, the KSE-100 Index declined by 202.91 to close at 33,672.49.

 

Participants/Activity

On average shares of 304 companies were traded. Of these 99 were gainers and 184 were losers and 21 remained unchanged.

Foreigners were net buyers $5.89m during the week; companies were seller by $3.01m, Banks were seller $0.26m; Mutual fund net seller $5.19m and individuals net buyers $1.44m.

Volume leaders during the week were: Maple Leaf 20m; K-Electric Ltd 18m; TRG Pak Ltd 9m; Lotte Chemical 8m; Bank of Punjab XD, D. G. Khan Cement and Dost Mohammed Steel Mills Ltd 7m each; Quice Food 3m and Sui Northern Gas, Cherat Cement, Hub Power Co, TPL Corp Ltd and Escorts (R) 2m each.

Triggers
  • Reserves fall by 189 million to $7.083 billion during the week ending on July 5 due to extended debt servicing. The first tranche from IMF of $991.4m received on July 9 increased reserves to $8.035 billion.
  • SBP will announce monetary policy on July 16, which will be the first under the new Governor.
  • Total inward remittances in FY19 clocked in at $21.841 billion, up 9 percent
  • In Karachi, PM rejected the traders’ demand of withdrawing CNIC conditions for sale and purchase activities, invited textile producers for detailed talks.
  • Asian Development Bank to give $10 billion in five years for development projects including $2.1 billion disbursement during the current fiscal year.
  • Foreign investors’ confidence rises as survey revealed 65% increase in the visit to the country by OIC members due to visibly improved security situation.
  • The country’s auto sector ended the fiscal year 2018-19 on a dismal note owing to massive devaluation of the currency, introduction of new taxes, high interest rates and rising fuel prices.
Conclusion

“Things are getting better,” says SBP Governor on Thursday at an interactive dialogue with President World Economic Forum Borge Brende. Exchange rate policy has now started reflecting according to Governor the demand-supply gap of foreign exchange inflows and outflows. The monetary policy decision is on 16th July, which is important to watch as it will reflect how much better things are getting at monetary level. The exchange rate and discount rate are two important factors which bring ripples in the stock market.

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