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Investors go for profit-taking over FATF concern, index down 1.8%wow
Summary

After two weeks of bullish movement in early October, the investors this week went for profit-taking in oversold market. Pakistan Stock Exchange (PSX) Index lost 606 points to come down to 33,000 level to close at 33,870.15. The average volume too declined to 140m; almost half of last two weeks. The market capitalization declined by Rs.132 billion. Foreigner continued to remain seller with $2.13m while individuals remained buyer with $8.36m.

The week being a rollover week as well as quarterly results started coming, the investors throughout the week were following the FATF development and were also keen on JUI-F Azadi march. As such investors seem to be cautious and some of the brokers were concerned over SECP’s standard commission regulations. Besides the visiting IMF team discussed with the FBR officials views on tax harmonization.

After a bullish trend last week, the market on Monday went for profit-taking. Index moved in a narrow band most of the day but started taking shape negatively by the end to shed 289.43 points to close at 34,186.26. The volume collapsed from 287m shares to 138m on Monday.

The same bearish trend continued on Tuesday and KSE-100 Index lost 102.73 points to close at 34,083.53. The volume improved to 156m.

As positive vibes on FATF started coming the market improved on Wednesday. Framework in place to counter terror financing was introduced by SBP. The Index gained 197.5 points to close at 34,281.09.

The stocks on Thursday again lost 382.52 points as JUI-F Azadi march started getting importance while Pakistan’s possibility of totally coming out of grey list under FATF meeting was diminishing. The Index closed at 33,898.56 down.

On Friday the Index kept oscillating up and down as FATF decision was to be announced. Most of the investors had a feeling of the retention on grey list. As such Index closed flat 28.41 percent to close at 33,870.15.

 

Participants/Activity

On average shares of 371 companies were traded. Of these 155 were gainers and 193 were losers and 24 remained unchanged.

Foreigners were net seller $2.13m during the week; companies were seller by $2.26m, Banks were buyer $5.36m; Mutual fund net seller $4.15m and individuals net buyers $8.35m.

Volume leaders during the week were: Lottee Chemical 106m; Worldcall Telecom 44m; Unity Foods 31m; Fauji Cement 26m; TRG Pak Ltd 21m; K-Electric 17m; Engro Fertilizer & Bank of Punjab 8m each; Engro Polymer 7m and Quice Foods 3m.

Triggers
  • In order to strengthen trade related Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) regime and restrict possible misuse of banking channels, a comprehensive framework on the subject has been developed by the State Bank of Pakistan (SBP).
  • The foreign exchange reserves held by SBP increased by $56 million to $7.813 billion during the week ended Oct 11, 2019. The total reserves stood at $15.142 billion.
  • The export of services dipped by 7.15 percent to $809.03 in the first two months of this fiscal year as against $871.35 in same period of 2018-19.
  • Pakistan cancels huge 10 year LNG tender to buy liquefied natural gas and may turn to the spot market instead.
  • Investment in government papers reaches record Rs.10.3 trillion in August, major in short term papers.
  • Brokers protest against standard commission as SECP introduced standard/scale of brokerage commission with effect from Oct 14, 2019. According to the notice, the commission range of three paisa per share or 0.15 percent transaction value – whichever is higher – upto 2.5 percent of the transaction value has been prescribed.
  • Pakistan GDP growth of 2.4 percent is projected lowest by the World Bank in regional countries – Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal and Sri Lanka for the current fiscal year (2020).
Conclusion

Technically a fall below 33,837 will extend the decline towards 33,389. Any upside will face resistance in the range of 34,030- 34,245. The MACD has moved down and the RSI has generated a sell signal supporting a corrective view.

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