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Political noise fails to stop bullish trend, index gain 2.1% wow
Summary

It was an interesting week when the economic forces and political forces stood face to face. The week started with the arrival of IMF and World Bank mission in Pakistan to assess State of Pakistan’s economy. The Azadi March on Islamabad of Maulana Fazal-ur-Rehman kicks off on Sunday from Karachi, calling for resignation of Prime Minister Imran Khan.

The end result of the two events –economic and political nature culminated at the end of the week Friday as follows:

President World Bank David R. Malpass after meeting Imran Khan on Thursday stated that there is substantial progress in Pakistan’s economic indicators despite global and internal fiscal challenges.

Maulana Fazal-ur-Rehman on Friday supported by PMl-N President Shahbaz Sharif and PPP Chairman Bilawal Bhutto Zardari gave a two-day notice to PM Imran Khan to step down.

In the light of above two developments, the KSE-100 Index gained 720 points to cross 34,000 level to 34,377.61 on Friday. The Index was bullish for three days. The volume too increased to average 166m while market capitalization increased by 58 billion to stand at Rs.6,698 trillion.

The week on Monday started on nervous note with Azadi March of JUI-F started on Sunday. The cement sector performed well on the news of deferment of axle load policy for a year by the government. The Index gained 204.13 points to close at 33,861.59.

On Tuesday the Index was dragged by banking and fertilizer sectors. The Index moved in a narrow range and finally closed at 33,797.51 shedding 64.08 points but volume increased to 225m.

The risk-averse investors did not take fresh position on Wednesday due the Azadi March and the continuation of traders strike on second day. The Index shed 36.10 to close at 33,761.41 points.

The PIB auction on Wednesday saw heavy bidding. Yields declined especially in 10-year instrument that signal the view of rate cut in the upcoming monetary policy. Also the trader strike agreement was also a positive news on Thursday. The KSE-100 Index gained 442.27 points to close at 34,203.68.

The market remained positive on Friday as PM again clarifies to agitating leader in Azadi March, ‘No Amnesty’ while paying tribute to the heroes of Gilgit-Baltistan Independence struggle against the Dogra Raj. The KSE-100 Index gained 173.93 points to close at 34,377.61.

 

Participants/Activity

On average shares of 348 companies were traded. Of these 179 were gainers and 144 were losers and 25 remained unchanged.

Foreigners were net seller $3.12m during the week; companies were buyer by $4.59m, Banks were seller $2.53m; Mutual fund net buyer $2.79m and individuals net seller $1.25m.

Volume leaders during the week were: WorldCall Telecom 75m; Bank of Punjab 40; Maple Leaf XD 35m; Fauji Cement 40m; Pak Int. Bulk 24m; Siddiqsons Tin 15m; Hasco Petrol & Unity Foods Ltd XD 13m; TRG Pak Ltd 8m; Amreli Steels, Pak Petroleum XD & K-Electric 6 m each.

Triggers
  • Visiting IMF mission had preliminary discussions on first quarter (July-Sept) data relating to revenue collection, its beak up and the reasons for shortfall of about Rs.113 bn. Pakistan request IMF to cut tax targets by 330 billion to Rs.5.2 trillion for FY20.
  • World Bank president said the reforms carried out by Pakistan for ease of doing business would help create jobs, attracting investment and generate more tax revenue.
  • According to Hafeez Shaikh government and IMF discussed tax collection and the government was taking steps for improvement of infrastructure and trying to ensure that tax players do not face further tax burden.
  • Pakistan is one of the 10 economies where the business climate has improved the most over the past year said Fitch Rating in a Report issued on Friday.
  • The deadlock between the government and the traders finally end their two-day strike on Wednesday after both sides reached an 11 points agreement.
  • Significant progress has been made between the May-September period to meet the action plan items set by FATF in different areas to demonstrate effectiveness of Pakistan AML safety regime said SBP Governor.
  • Reserve held by the SBP rose by $21.6 million to $7.914 billion during the week ended on Oct 25, 2019.
Conclusion

Like September, October was second successive month of bullish market as KSE-100 Index increased 7% market momentum. Best performing sector during the month were refineries, engineering, pharmaceutical and cement. Foreigners remained net seller during the month.

RSI and the MACD have moved up, supporting a positive view. The support and resistance are at 33,976 and 34,432.

Raees Uddin Khan,
Research & Development Institute of Securities Management Research & Training (Pvt) Ltd, Karachi.

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