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KSE-100 index drop by 63 points on profit-taking
Summary

Investors decided this week to profit-taking after the continuous positive movement of KSE-100 Index since December 28 adding 2,515 points and also breaching 46,000 level. In the five day trading of the week, the KSE-100 Index moved up and down and finally shedding 63 points at the end of the week on Friday.

The week was marked by Joe Bidden sworn in as new president of US on Wednesday. There was no nervousness on the part of government over the PDM rally over foreign funding case or holding an anti-Israel rally. There was expectation among investors about monetary policy to remain unchanged to be announced on Friday. Investors were comforted by the government’s renegotiation with power sector on resolution of circular debt. The announcement of an increase in the power tariff of Rs.1.95 per unit across-the-board with the financial impact of Rs.200 billion, though harsh on the consumer will kick start the IMF negotiation.

During the week the KSE-100 Index lost 0.1% WoW to close at 45,868.04 on Friday. The average volume declined by 25% to 510m. The market capitalization increased by 7 billion to close at Rs.8,315m. The foreigners were buyer by $5.79m.

On Monday, the market continued its third fall of 204m to close at 45,726.68. Investors were concerned over political uncertainty over foreign funding case taken up by PDM.

On Tuesday, the stock gained 176.55 points to close at 45,903.23. The foreigners continued to be the buyers of $1.73m for second consecutive day.

Mutual funds on Wednesday sold $10.71m and the Index dropped by 226.29 points to close at 45,956.94

The investors seemed to be concerned on Thursday about incoming Monetary policy. Furthermore it was a good news that government started renegotiation on power sector on resolution of circular debt. The Index gained 307.52 points to close at 45,984.46.

On last working day Friday the investors were cautious as also the Monetary Policy was to be announced, the Index shed 116.42 points to close at 45,868.04

Participants /Activity

On average shares of 415 companies were traded. Of these 176 were gainers and 221 were loser and 18 remained unchanged.

Foreigners were buyer by$5.79m, Banks were buyer $0.66m; Mutual fund net seller $19.89m, Company buyer $6.92m, Insurance seller $3.11m and Individual buyers$15.47m.

Volume leaders were: K-Electric Ltd 250m; Fauji Foods Ltd 115m; Hum Network 106m; Unity Foods Ltd 104m; TRG Pak Ltd 99m; Pak Int. Bulk 53m;Silk Bank Ltd 43m;Pak Refinery 29m; Power Cement 28m; Invest Capital Investment Bank Ltd 24m; and Fauji Fertiliser Bin Qasim Ltd 11m.

Triggers

-Foreign investment drops by30 percent in first half of FY21. It was $952 million compared to $1.357 billion same period of last fiscal year.

– Domestic debt increased by Rs829 billion to Rs.24.11 trillion in the first five months of the current fiscal year.

– Current Account turns negative in December by a deficit of $662 million after five months surplus of $1.13 billion.

– The government is all set to approve a new policy on equity investments from abroad aimed at improving ease of doing business facilitating resident companies capital from abroad and meet the legitimate investment needs of individuals.

– Government likely to import LNG itself till new terminals commissioned.

– Government announced an increase in the unified base tariff of power Distribution Companies (Discos) of Rs.1.95 per unit across-the-board with the financial impact calculated at Rs200bn.

– Teresa Daban Sanchez Resident representative of IMF said: “discussions are going on, both work teams working very hard and nonstop to bring the program review to a positive conclusion.”

– The SBP is to announce monetary policy on Friday which most believed would be kept unchanged at 7 percent.

– The foreign exchange reserves of the SBP fell by $386.2 million due to external debt payments that brought down its total holdings to $13,013m and Banks $7.10 billion during the ended on Jan 15.

– Plea against privatization of KE dismissed by SHC.

– Covid-19 vaccines will be made available free of charge.

– The Supreme Court has declined a federal government request for facilitating the settlement of almost Rs.300 billion worth of financial claims among various public sector entities and K-Electric.

– SPI for the week ended on Jan.21 recorded an increase of 0.32 percent over the last week due to rise in prices of food items.

Conclusion

Some positive developments in the economy could boost certain sector shares.

Astra Zeneca’s Covid-19 vaccine was approved for emergency in Pakistan could trigger interest in pharma stocks.

Sharp growth of 22 percent in deposit have improved Banking earnings by 16 percent on year-on-year for full FY20.

Revival of zero rate rating for textile sector could boost textile sector.

Cabinet Committee on Energy if could solve LNG crises could affect E & P sector.

Dismissal of pleas against privatization of KE by Sindh High Court and possible effort to settle circular debt could boost KE shares.

Raees Uddin Khan,
Research & Development Institute of Securities Management Research& Training (Pvt) Ltd, Karachi.
Dated: Jan 23, 2021

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