Stocks remains bearish as KSE-100 index falls 2.35% WoW
Summary
Month January started on a positive note gaining 1,588 points in the first three days of the first week of the year 2020. But in the later days of the week the Index went down gradually and finally closed in the negative territory with 272.56 points on Friday.
The investors sentiment during the week remained under the influence of coronavirus spreading from China, which triggered panic a prices falling on commodities and oil. The political uncertainty created over the government’s survival and change of Punjab CM, the Monetary Policy expectation and the government struggle to come out of FATF grey list review due next month.
During the week, the KSE-100 Index declined by1002.08 to close below 42,000 level at 41,630.94. The average volume almost remained same as previous week of 188m. The market capitalization went down by 108 billion to close at Rs.7.851 trillion. The foreigner were net seller with $8.01m.
On Monday, the trading started on a negative note as foreigners turned net seller of $0.23m. The volume declined from last Friday to 199m. However, high net worth individuals gave support and were buyer worth $3.06m. The Index shed 93.79 points to close at 42,539.23.
On Tuesday, the stock lost 240 points. Absence of any positive triggers, higher than expected inflation and the pressure of rollover week brought Index down by 240.04 to close at 42,299.19. The foreigner remained seller worth $3.87m.
On Wednesday, the impact of SBP’s Monetary Policy announced on Tuesday could be seen. As policy rate remained same at 13.25 percent the Index shed 400.49 points to close at 41,898.70 points.
On Thursday, the stock closed flat increasing Index by 4.80 points to close at 41,903.50. The market recovered due to some positive factors like foreign inflows, rupee stability and investors speculation over Rs.150 billion target recovery in state-owned enterprises privatization.
On Friday, the investors decided not to take week-end risk and the market tumbled 272.57 to close at 41,630.93. Due to absence of market moving triggers, last day of the rollover week and continuous selling by foreigner worth $1.72m kept the market on downside in second half of the day.
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Participants/Activity
On average shares of 351 companies were traded. Of these144 were gainers and 192 were losers and 15 remained unchanged.
Foreigners were net seller $8.01m during the week; companies were seller by $5.20m, Banks were seller $0.07m; Mutual fund net seller $2.26m and individuals net buyers $8.42m.
Volume leaders during the week were: Maple Leaf 67m; Hascol Petrol 65m; Unity Foods Ltd 44m; Worldcall Telecom31m; Bank of Punjab 27m; Pak Int. Bulk 25m; Avanceon Ltd and DG Khan Cement 16m each; TRG Pakistan Ltd and Fauji Cement 12m each; PIA C (A) 10m; K-Electric and Fauji Fertilizer Bin 9m each.
Triggers
- Oil and commodities market chilled as virus hits demand and prices have fallen victim to economic worries sparked by a deadly virus spreading from China.
- ECC of the Cabinet on Jan 28 cut Government Infra structure Development Cess (GIDC) on manufacturers from Rs.450 to Rs.50 per mm Btu applicable on natural gas supplied to the sector. Engro cuts urea prices by Rs.160 per bag.
- Foreign exchange reserves of SBP increased by $184 million to $11.915 during the week ended on Jan 24.
- Pak Suzuki to shut production for three days in February.
- The Monetary Policy Committee on Tuesday decided to keep the policy rate unchanged at 13.25 percent for two months as the inflation outlook is remained unchanged.
- Hot money inflows soar to $2.9 billion. Foreign investment in government’s debt papers — mostly treasury bills — reached around $1.5 billion in January alone pushing up total investments in the risk free papers to $2.9 billion during the current fiscal year.
- Six SOEs will be privatized to meet Rs.150 billion target.
- Government takes big step towards FATF challenge to take approval of the Parliament for amending 14 to 15 laws for placing an effective legal framework against money laundering and terrorist financing before the next fiscal budget.
Conclusion
Technically the Index has dropped below the 30-DMA indicating potential for further downside. The next target at the 50 DMA standing at 41,044. Any upside will face resistance in the range of 41,965-42,430. The RSI and MACD are heading down supporting a negative view.
Raees Uddin Khan,
Research & Development Institute of Securities Management Research& Training (Pvt) Ltd, Karachi.
Dated: Feb1, 2020