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PM’S US visit euphoria subside over imf reforms and political concern as index down 1% wow
Summary

The three-day visit of Prime Minister Imran Khan to the United States starting last Sunday and concluded on early morning hours of Thursday after premier Imran Khan landed in Islamabad the opposition parties start preparing to launch Protest Day on completion of one year PTI government on July 25. The stock index, which is sensitive to political and economic news, had a topsy-turvy performance during the week due to expected gains of the visit while investors were concerned over the implementation of IMF agenda urging Pakistan to mobilize domestic tax reforms to ensure funds for social and development programs and to overcome debt problems. The positive aspect of the visit included coalition fund acknowledgement, possibility of dialogue on Kashmir dispute with India with US acting as mediator. Overall the ambiguity in US Pakistan relationship was ‘reset’ with clear direction as how the relationship between the two countries get going in future over Taliban/Afghanistan issue and possibility of ‘trade’ with US to progress. US is one of the biggest trade partners of Pakistan.

The stock market, which has declined 1214 points last week started incorporating the positive impact of the visit last Friday and was bullish till Tuesday this week. On political concern of strikes and Senate Chairman removal move with negative corporate results pouring in the market index turned negative shedding 356 points to close on Friday at lowest level of 32,103.27. The average volume declined to 75 million while market capitalization was Rs.6,165; recording a loss of Rs.110 billion.

The stock market begins trading on Monday which closed on positive note on preceding Friday remained positive ahead of Trump-Imran meeting on Monday. The stock gained 125.78 points while volume remained thin with only 45m. The index closed at 32,584.55.

The impact of US President carried over on Tuesday and KSE-100 index gained 131.33 points to close at 32,715.88.

On Wednesday, the investors interest shifted to results on corporate sector where the sentiments remained low. Index snaps three-day rally with decline in index by 314.48 points to close at 32,401.40.

On Thursday, there was mixed performance and in the end the value hunters help index close in green by gaining 45 points to 32,446.40.

On last day of the week, Friday, the investors decided to reduce their positions as the last day of the rollover of future contract. The index shed 343.13 points to close at 32,103.27 level.

 

Participants/Activity

On average shares of 315 companies were traded. Of these 120 were gainers and 172 were losers and 23 remained unchanged.

Foreigners were net buyer $4.42m during the week; companies were buyer $1.24m, Banks were buyer $2.86m; Mutual fund net seller $13.44m and individuals net seller$0.4m.

Volume leaders during the week were: Maple Leaf 34m; Bank of Punjab 30m;Unity Foods Ltd 22m; Pak Elektron 18m; World Telecom 15m;TRG Pak Ltd 13m; Fauji Foods Ltd 11m; D. G. Khan Cement 7m; K-Electric 4m and Inter Steel 2m.

Triggers
  • SBP total liquid foreign exchange reserves decreased to $7.611 billion as of July 19, down $389 million.
  • The automotive industry fears that amid declining auto sales, the sector is likely to lose at least 10-15 percent of the direct jobs over the few months.
  • Mobile phone imports during FY2018-19 decreased by 10.87 percent compared to the corresponding period last year.
  • The Federal Board of Revenue has notified making it mandatory for ordinary citizen to show CNIC mandatory incase of purchases over Rs.50,000.
  • FBR has drafted new sales tax refund rules for faster, automated payment of the refund claims.
  • FBR constituted a Financial Action Task Force (FATF) Cell to ensure effective and timely completion of FATF related Action Plan.
Conclusion

It seems as most of the negatives have already been priced in where KSE-100 Index is offering most attractive valuation amongst its peers. Market is still to quantify attractive outcomes of its positive renewed US-Pakistan relationship benefits of downward and restructuring policies and IMF program. Moreover foreign inflows during July 2019 is continuously picking up which is a healthy sign.

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