Stock Review - Stocks get off to a lively start in 2020; geopolitical concerns, SBP decision may dominate.

 
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Byline: Shabbir Kazmi

Meeting the New Year on an exuberant note, with market expectations of economic stability crystallizing, the benchmark index of Pakistan Stock Exchange (PSX) closed at 42,323 points, up 3.6%WoW for the week ended 3rd January 2020. Average daily traded volume was 23% to 281 million shares. Based on NCCPL data, foreigners were sellers with US$7.3 million.

The total liquid foreign reserves of Pakistan were reported at US$18,081.4 million on 27th December 2019. The break-up was: reserves held by the State Bank of Pakistan (SBP) amounted to US$11,489.4 million and net foreign reserves held by commercial banks were at US$6,592.0 million. During the week under review, reserves held by the central bank increased by US$582 million to US$11,489.4 million. This increase is attributed to bilateral and multilateral inflows including proceeds of US$ 452.4 million received from International Monetary FUND (IMF) under EFF program.

On the local side, Mutual Funds and Banks were net buyer of US$8.6 million and US$4.2 million. Major news flows during the week included:

1) the GoP through a Presidential Ordinance introduced significant changes to tax laws to implement concessions promised to traders, reduce duty on import of low-value mobile phones, remove limit on inter-corporate dividend tax relief and penalize currency smugglers,

2) The GoP increased fuel prices for January 2020 by approving the recommendations made OGRA, 3) FBR collected Rs2,080 billion during the first six months of the current financial year, as against the target of PkR2,198 billion projected for the same period and 4) NEPRA increased KEL's tariff by 38% under quarterly adjustment formula.

Top performers of the week included: LUCK, PAEL, FFBL, PSO and ASTL. Volume leaders during the week included: TRG, UNITY, KEL and PAEL. Average daily traded volume was 23% to 281 million shares. Based on NCCPL data, foreigners were sellers with US$7.3 million. On the local side, Mutual Funds and Banks were net buyer of US$8.6 million and US$4.2 million.

Geopolitical concerns are expected to dominate headlines overt the coming week, where the US decision to target senior Iran military leaders in Iraq early Friday, have already rattled crude markets (Brent/WTI up US$2.6 and US$2.4 per barrel respectively. As global market activity picks up and the mid January 2020 Monetary Policy decision will take center stage, some consolidation is likely in the weeks ahead.

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