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Stocks lose 324 points on short week and market volatility
Summary

It was a short week of four days trading due to holiday on 25th December being the birth anniversary of Quaid-e-Azam. It was also a rollover week for short sellers which put them under more pressure to exist or rollover by 24th December There was concern in UK/USA and other markets over the new Covid-19 cases that compelled lockdown, which descended to our local market and investors rushed to book profit. It led to volatility in the market and for opening two days the market shed 834 points with international oil prices fluctuations affecting the stock index. However the continuous monitoring of Covid-19 situation by the government along with positive macros led index to recover in last two days of trading.

During the week the KSE-100 Index shed 324 points to close at 43,416.77. The average volume declined by 8% to 507 million shares. The market capitalization decreased by Rs.79 billion to close at Rs.949 trillion.

The KSE100 Index, which gained 1,270 points last week went for profit taking on Monday and the Index lost 406.80 to close at 43,333.76. Oil stocks led the decline as international oil prices slumped.

There was concern over Covid-19 internationally which may impact global market. Stocks fall below 43,000 level and lost 426.82 points to close at 42,906.94 shedding another 426.82 points. The market fluctuated between high of 43,478.97 to low of 42,757.49. The volume increased to 562m.

On Wednesday the oil prices showed sign of recovery in global market and the local market improved by 180. 76 to close at 43,087.70.

On Thursday, last day of trading, the foreigners who are on continuous selling spree, sold $13.17m shares making the total of the week to $20.44m. The local companies absorbed the amount by buying $24.8m on Thursday. The KSE-100 Index gained 329.07 points to close at 43,416.77.

Participants/activity

On average shares of 401 companies were traded. Of these 180 were gainers and 200 were losers and 21 remained unchanged.

Foreigners were net seller of $20.44m during the week; companies were buyer by $25.62m, Banks were seller $0.56m; Mutual fund net seller $12.3m, Insurance buyer $1.14m and Individual seller $5.26m.

Volume leaders were: TRG Pak Ltd 112m; World Call Telecom 108; Pak Refinery 92m; Invest Bank 78m; Unity Foods Ltd 61m; Maple Leaf Cement 53m; Telecard Ltd 22m; Azgard Nine 21m and Pak Electron 17m.

Triggers

— The overall fiscal deficit during July-October FY2021 stood at 1.7 percent of GDP (Rs753bn) against 1.4 percent of GDP (Rs.564bn) in the comparable period of last year, showing an increase of Rs.189bn.

— Strong support in government continuing with low interest rates. The SBP had gradually peaked its policy rate to 13.25 percent until February this year when the Covid-19 pandemic hit the country and then gradually brought it down to 7 percent and maintained it in its latest policy statement last month.

— The State Bank’s latest data issued on Tuesday showed the current account surplus in November $447 million – the fifth consecutive month since July. It is an increase of 7.7 percent from $415m surplus in October.

— US lawmakers have approved $900 billion relief package for the world’s biggest economy that will provide a long-sought boost for millions of Americans and businesses battered by the coronavirus pandemic.

— In its annual reports for financial year 2019-20 SECP detailed measures, which were taken to promote capital formation, improve access to finance to SMEs, expand financial inclusion, provide ease of doing business and leverage technological advances to bring efficiency and transparency in its working.

— Foreign exchange reserves held by the SBP declined by $83 million to $13.216 billion during the week ended on Dec 18 on account of external debt.

— Rs.1.53 hike in power rates likely as Nepra prepares fuel cost hearing.

— Cabinet allows incentives for electric vehicles.

Conclusion

The Prime Minister complain of not having enough briefing like the US President before take over the power is now no more justified after running the government for two and a half year. This experience should be enough now to turnaround the economy particularly when there is so much success achieved during the period and the KSE-100 Index has crossed almost three years high, which shows the confidence of the investors. Implementation and follow up of the policies made is the key.

Raees Uddin Khan,
Research & Development Institute of Securities Management Research& Training (Pvt) Ltd, Karachi
Dated: December 25, 2020

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