Pakistan’s equity remains volatile on political uncertainty

KARACHI: Pakistan Stock Exchange (PSX) remained under pressure the entire week ended April 19, 2019 owing to lack of clarity over the PM’s decision to make changes in the cabinet, which finally ended with major changes including the removal of Asad Umar from the Finance Ministry. [the_ad id=”31605″]“Failure to get an Amnesty Scheme approved by the cabinet by the Finance Minister also depressed sentiment. Moreover, Commercial Banks remained under pressure mid-week as news of consultation process for creation of a Treasury Single Account (TSA) that would transfer government deposits in Commercial Banks to the SBP, took rounds in the market. However on the last trading day of the week the market rebounded strongly,” a report issued by Arif Habib Limited said.

The benchmark KSE-100 index closed at 37,292 points at the end of the week, receding by a mere 45 points. The average daily traded volumes settled at 176 million shares, up by 18 percent, while average daily value traded clocked in at USD 39 million, up by 16 percent.

 “Considering that the general market narrative has remained bearish due to policy actions (or lack of) taken by the FM, the market reacted positively to his removal from the post and closed the week on a high note,” Ahmad Lakhani at JS Global Capital said.

Foreign selling continued this week clocking-in at USD 1.9 million compared to a net sell of USD 2.2 million last week. Selling was witnessed in Exploration & Production (USD 5.3mn) and Oil & Gas Marketing Companies (USD 0.4mn). On the domestic front, major buying was reported by Companies (USD 4.6mn) and Individuals (USD 2.3mn).

In the context of economic data releases, the current account deficit increased by 196 percent on MoM basis during March, led by a higher trade deficit. However, recent statements by the now ex-FM Asad Umar and the Adviser on Commerce, Abdur Razzak Dawood suggest that positive developments on the China-Pak FTA II could lead to a resurgence in exports in upcoming months and hence, an improved balance of payments situation.

“Going forward, we expect the market to continue the momentum it gained on Friday and remain in the green next week. Inclusion of technocrats into the federal cabinet may be seen as a positive step for policy making. Valuations across the board have opened up and investors are advised to build positions in value stocks,” Arif Habib Limited report said.

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