Stock Review.

Byline: Shabbir Kazmi

Geopolitical tensions keep bulls away; mini-budget, IMF package and Sukuk may retake shine

The movements at Pakistan Stock Exchange (PSX) during the week ended 1st March 2019 were largely reflective of the prevailing geopolitical tensions between Pakistan and India. The benchmark Index touched a low of 37,323 points, but managed to close the week at 39,539, posting a paltry decline of 477 points or 1.2%WoW. The Index declined by 6.7% mid-week as cross border tensions escalated and panic kicked in leading to an across-the-board sell-off. However, market recovered 1,369 points as investors took positions on dips. The increasing possibility of de-escalation amid calls from international community brought back the confidence in the following days.

In the wake of volatility, average daily volume at the bourse rose to 152 million shares, up 45%WoW. Volumes leaders of the week were: BOP, KEL, PIBTL and EPCL, while laggards included ASTL, EFOODS, HASCOL and PIOC.

Key news flows during the week were: 1) violation of LoC by Indian aircrafts, 2) escalation of cross-border tension after Pakistan brought down two IAF jets in a brief engagement, 3) Prime Minister Imran Khan offering peace talks to India while announcing the release of captured Indian pilot, 4) decline in repatriation of profits by 33%YoY during first seven months of current financial year, 5) oil prices increasing after OPEC's statement to continue oil output cuts and 6) Fitch anticipating a US$12 billion IMF bailout for Pakistan.

The first round of cross-border engagement ended with the return of captured Indian pilot. The upcoming week is likely to be affected by how the two nations deescalate the recent geo-political tensions, especially in the face of the upcoming elections in India. With the result season behind us, in addition to geo-political news, market action will be shaped by passage of mini-budget through parliament, clarity on IMF package and any news-flow regarding issue of Sukuk for the resolution of circular debt issue.

The total liquid foreign exchange reserves held by the country were reported at US$14,815.8 million on 22nd February 2019. The break-up of foreign reserves indicated State Bank of Pakistan (SBP) holding US$8,036.8 million and net foreign reserves held by commercial banks at US$6,779.0 million. Reserves held by the central bank decreased by US$6 million to US$8,036.8 million during the week under review.

During February 2019...