Stock Review.

Byline: Shabbir Kazmi

After recording heavy losses in the earlier week due to heightened tensions on geopolitical front, Pakistan Stock Exchange (PSX) posted a strong recovery during the week ended 23rd August 2019 as tensions eased slightly eased. The rebound can be termed a dead cat bounce after the market posted a decline of 46% from its peak of 53,000. The benchmark index closed the week at 31,350 points, up 9.0%WoW. With the strong rally, activity in the market the average traded volume also rose to 174.42 million shares. Foreigners remained net sellers during the week with outflow recorded at USD4.96 million.

Key news flow during the week included: 1) The Government of Pakistan (GoP) appointing Aamir Khan, Chairman of Securities and Exchange Commission of Pakistan (SECP), 2) US President, Donald Trump initiating telephonic diplomacy between Pakistan and India to lower the tension in the region as he spoke to Pakistani Prime Minister Imran Khan and India's Narendra Modi, 3) Prime Minister Imran Khan approving an extension in the tenure of Chief of Army Staff, General Qamar Javed Bajwa for three years, 4) current account deficit (CAD) shrinking by a massive 73% in the first month of this fiscal year to US$579 million in July, as compared to US$2.13 billion in same period of 2018-19, and 5) Government's Pakistan Investment Bonds (PIBs) auction witnessing record participation with total bids crossing one trillion rupees mark.

Volume leaders during the week were: TRG, MLCF, BOP, UNITY and WTL. Stocks leading the performance board during the week included: PIOC, ASTL, GWLC, FCCL and NML.

Analysts expect the investors to focus on the inflation reading as the market approaches end of the month. The corporates scheduled to announce results next week include NBP, FCCL, INDU and FATIMA. However, geopolitical situation still remains a risk and any escalation can weigh significantly on the market. Also, market can be expected to continue the rally witnessed in first four days albeit at a relatively muted pace after taking a breather on Friday.

The Government of Pakistan (GoP) conducted second Pakistan Investment Bonds (PIBs) auction after signing the IMF program. The GoP borrowed Rs415 billion, Rs55 billion and Rs25 billion through 3, 5 and 10 year bonds at cut-off rates of 14.25%, 13.55%, and 13.15% respectively. The cut-off rate remained unchanged for 3 year bond. However, for 5 and 10 year bond yield curve was further inverted by 25bps and...