Stock Review.

Byline: Shabbir Kazmi

Fragile economic view keeps market under pressure as index down 1,700 points

Due to likely harsh conditions emanating from entering into yet another program with International Monetary Fund (IMF), the benchmark index of Pakistan Stock Exchange (PSX) lost about 1,700 points (down 4.36%WoW) during the week ended 12th October 2018.

In the earlier week the index had lost 1,772 point due to the fragile economic outlook and the ongoing foreign sell-off. This made investors jittery and plunged the index to 37,518 points (119-week low). The selloff was driven by: 1) fragile economic outlook and rising interest rates as investors look for attractive yields in fixed income asset class and 2) the statement of IMF chief hinting towards stringent conditions for a bail-out package.

The average daily traded volumes at the bourse rose by 65.3%WoW to 187.5 million shares and the top volume leaders were: TRG, BOP, KEL, LOTCHEM and EPCL. Certain stocks are under risk of exclusion from MSCI's EM index. Amongst Pakistan stocks in the MSCI EM Index, prices of LUCK and HBL declined the most, down by 11% and 8% respectively. Commercial banks and cements were the worst performing sectors during the week. Foreigners offloaded equities worth US$32.6 million (largest selling after 8 weeks) as compared to net selling of US$8.4 million a week ago. On local front, Companies, Insurance and Banks emerged major buyers.

Major news highlights during the week were: 1) Government of Pakistan formally announcing its intention to approach IMF, with the latter demanding transparency over Pakistan's external debts including those owed to China, 2) Asian Development Bank announcing US$7.1 billion financial package for Pakistan spread over a three year period, 3) State Bank of Pakistan in its latest data revealing that country's trade deficit narrowed by 1.8%YoY to US$8.9 billion during first quarter of the current financial year, 4) delegation of the Asia Pacific Group asking Pakistan to do more in order to get out of the grey list of FATF and 5) Prime Minister Imran Khan launching 'Naya Pakistan Housing Program' aimed at building five million low-cost housing units across the country.

While the major gainers were: KEL, ASTL, OGDC and PTC; the laggards included: PSMC, CHCC, MLCF, INDU and FATIMA.

Testing new lows, medium term performance for the market would continue to revolve around macro-level policy initiatives of the Government of Pakistan, especially...