Stock Review.

• Author: Kazmi, S. Kamal Hayder
• Position: Pakistan Stock Exchange

Byline: S. Kamal Hayder Kazmi

Positive normalcy returns, upcoming budget will set future direction

The week ended 24th May 2019 marked substantial recovery at Pakistan Stock Exchange (PSX), with benchmark index gaining 2,537 points, up 7.65%WoW to close at 35,704 levels. The market closed positively for the first time after seven weeks. After a decade, the benchmark index posted the largest weekly gain of 7.65% or 2,537 points, the last highest gain of 9.1% was recorded in first week of April 2009. All sessions of the week closed on positive note, showing renewed optimism of investors on the back of market support fund and deferred oil facility by Saudi Arabia. Average daily traded volume during the week was up about 57% to 157 million shares as compared to about 100 million shares a week ago. Activity remained tilted towards main board, similar to that of earlier week.

Unsuccessful drilling at Khekra-1 caused a major fall at the beginning of the week. Higher than expected interest rate hike of 150bps brought interest in the banking sector (news regarding termination of compliance agreement by Federal Reserve with UBL also acted as a trigger). However, the hike remained largely a non-event for the leveraged plays that posted gains on improved market sentiments. Other news affecting the market included: 1) possible roll-back of subsidies to export sectors in FY20 budget in an attempt to meet IMF primary deficit target of 0.6% of GDP and 2) the government likely to fix PSDP target of Rs675 billion. Top performers of the week included: GWLC, PIOC, PSO, MLCF and PSMC.

While euphoria surrounding market support fund could persist in the immediate term, investors should remain wary of the fundamental weaknesses while taking exposures in certain sectors. Investors are also advised to keep a keen eye on budget related news which is expected to define market direction in the upcoming week. Further, with holiday season near, market may witness thinner volumes.

Total liquid foreign exchange reserves held by the country were reported at US$15,126.5 million on 17th May 2019. The break-up was: reserves held by State Bank of Pakistan were US$8,057.6 million and net reserves held by commercial banks amounted US$7,068.9 million. During the under review reserves held by SBP decreased by US$788 million to US$8,057.6 million due to external debt servicing and other official payments.

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