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Stock Watch

Stocks remains under pressure on inflation and political noise
Summary

The KSE-100 Index is continuously under decline since week starting July 8 till close of August 2, 2019 coming down from 34,190 to 31,666 level. Investors are witnessing many economic and political events unfolding fast and continuous. It is difficult for stock investor to make a sense out of it and decision making of stock investors who prefer to look for stability and clarity. As such stock market is volatile with low participation. The stock index has hit its lowest level during the period. The foreigners remain positive and buyers during the period.

IMF loan approval and its impact, Budget approval, Monetary policy rate and exchange rate direction, Asset Declaration Scheme 2019, Tax matters, Political maneuvering by the Opposition to topple the Government, No-Trust resolution against the Senate Chairman and Successful visit of the Prime Minister to USA giving new hope for Kashmir solution while fast accountability process with more opposition leaders in jail and under investigation are the highlights of the week.

During the week KSE-100 Index shed 437 points to close at 31,666.41 points. The average volume declined to 57 million while market capitalization eroded by Rs.120 billion to close at Rs.6.345 trillion.

During Monday the market traded mostly in the negative zone after initial gain of 19 points in index to close with decline of 369 points to 31,734.23. The volume slumped to 46 million from 87 million last Friday.

The market continued to remain dull on Tuesday and lost 76 points to close at 31,658.12. The market remained influenced under Government and Opposition member tussle as well as concern for the economy. The Government announcement of Pakistan Energy Sukuk-II amounting to Rs.200 billion could not boost the market.

The market picked up 280.36 points to close at 31,938.48 on Wednesday. The expectation of low inflation and possibility of interest rate reversal plus last day of rollover week pushed the market. The foreigners continued to be buyers with $1.64m. The volume jumped to 70 million.

On Thursday the Resolution against the Senate Chairman kept the market under uncertainty. The foreigners turned seller and index shed 99.37 points to close at 31,839.11.

On Friday the inflation figure of 10.30 percent for July brought the market down by 172.70 to close at 31,666.41.

 

Participants/Activity

On average shares of 328 companies were traded. Of these 145 were gainers and 157 were losers and 26 remained unchanged.

Foreigners were net buyer $3.70m during the week; companies were seller by $2.88m, Banks were buyer $0.99m; Mutual fund net seller $4.78m and individuals net buyers $3.04m.

Volume leaders during the week were: Maple Leaf 32m; TRG Pak-Ltd 18m; K-Electric 13m; Fauji Cement 10m; Inter Steel 9m; Pak Electron 8m; Unity Foods 4m; World Telecom 3m and Mughal Iron, PIBTL and BOP 2m each.

Triggers
  • Reserves held by the SBP increased by $155 million to $7.767 billion during the week which ended on July 26, 2019.
  • Intensifying against the mandatory requirement of providing CNIC for sale and purchase of goods traders association across the country have announced a four-day shutter down after Eidul Azha.
  • FBR misses July target by Rs.14 billion for July despite introducing several revenue and administrative measures in the Act 2019. FBR has provisionally collected Rs.277 billion against a target of 291 billion.
  • According to the CPI data PBS, the CPI general inflation increased by 10.34 percent on year-on-year basis in July, 2019.
  • No Confidence motion against Senate Chairman defeated by 14 opposition senators.
  • A meeting of the Finance Committee of National Assembly has passed proposed Anti-Money Laundering Bill and Foreign Exchange Regulations to curb money laundering, practice of Hawala/Hundi and other forms of illegal exchange transactions in the country.
Conclusion

KSE-100 Index is trading at almost 60% discount with P/E of 5.8x. Investors’ sentiment would improve further with injection of stock fund as going forward giving an encouraging results of new macro adjustment and economic stability with political tone down after Senate election.

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