Stock Review.

• Author: Kazmi, Shabbir

Byline: Shabbir Kazmi

During the week ended 26th July 2019, the benchmark index of Pakistan Stock Exchange (PSX) remained under pressure and registered a decline of 356 points to close at 32,103 levels. The week started on a positive trajectory as first two sessions cumulatively added 257 points to index, on the back of trip of Prime Minister Imran Khan to the United States, but subsequently sentiments turned bearish on weak macro indicators.

The key sectors adding to the erosion in the Index were Power and Distribution Companies followed by Food and Oil Marketing Companies. According to NCCPL data, foreigners remained net buyers with US$8.4 million, but Mutual Funds remained net seller with US$13.4 million. Average daily trading volume once again plunged to 75.3 million shares. Increased participation in PIB auction reduced attractiveness of the equities market.

Top performers of the week included: INDU, POL, UBL, HBL and FFC, while FFBL, HASCOL, MLCF, PIOC and ASTL were the worst performers. The market is expected to remain volatile in coming days due to commencement of results season, while inflation number would determine the future interest rate trajectory. Investors are advised to take longer term view in evaluating investment opportunities, giving lesser weight to short-term performance, as market may rebound on improving economic indicators.

The total liquid foreign reserves held by Pakistan for the week ended 19th July 2019 were reported at US$14,862.4 million. The break-up was: reserves held by the State Bank of Pakistan amounted US$7,611.9 million and reserves held by commercial banks were US$7,250.5 million. During the week under review reserves held by the central bank decreased by US$389 million due to external debt servicing and other official payments.

Government of Pakistan (GoP) conducted the first Pakistan Investment Bonds (PIBs) auction after entering into an IMF program, wherein tenor wise collection was 3-years (Rs120 billion), 5-years (Rs55 billion) and 10-year (Rs25 billion) and cut-off rates were 14.25%, 13.8%, and 13.55% respectively.

The cut-off rates were up by 55bps for 3-year bonds and remained unchanged for 5-year bond. However, for 10-year bond rates were down by 15bps compared to the last auction held on 26th June, 2019. Out of total offer of Rs700 billion, the government accepted bids worth Rs201 billion (29% of the amount) in fixed rate PIBs. In 10-Year bond, the government raised Rs84 billion out of total...