PSX Daily Market Review - 31st July 2017

Foreign Investors remained in a net selling position of 6.14 million shares and the net value of Foreign Inflow dropped by 13.45 million US Dollars. Categorically, Foreign Corporate Investors remained in a net selling position of 11.15 million shares but Overseas Pakistanis remained in a net buying position of 4.99 million shares. While on the other side, Local Individuals, Banks and Brokers remained in net buying positions of 14.43, 10.89 and 8.21 million shares, respectively but Local Companies, NBFCs and Mutual Funds remained in net selling positions of 6.58, 1.42 and 20.28 million shares, respectively.

Asian shares turned positive after solid Chinese data on Monday following a lackluster start, while the dollar edged up but remained capped by U.S. political uncertainty. MSCI broadest index of Asia-Pacific shares outside Japan reversed early losses to rise 0.1 percent. Chinese shares rose, with the blue-chip index up 0.15 percent and the Shanghai Composite up 0.2 percent. Hang Seng rose 0.6 percent. The official Chinese manufacturing and services purchasing managers indices both slipped in July, but remained above the 50-point mark that separates growth from contraction on a monthly basis.
Amid political turmoil the country’s internal and external accounts appear to be entering uncertain territory. The fiscal account, after showing marked stabilisation over the past four years, has started a downhill journey as evident from the 2016-17 budget deficit that was higher than a year before as tax machinery was Rs250 billion behind target. The external account is on an even more precarious path as all of its three key sources are going down, stagnating or not picking up. Exports have been falling for a few years now, remittances have started to show signs of disquiet, and foreign direct investment has not been able to show a marked improvement despite the CPEC shot in the arm. The timing of all these indicators is crucial. Politics has entered an uncertain phase with the prime minister no longer in office to take effective corrective measures. Therefore, the question about the need for another bailout programme from the International Monetary Fund (IMF) sometime around the upcoming political transition is again gaining ground.
The Supreme Court landmark decision to disqualify the prime minister has exposed the fragile and nascent democracy to a tough endurance test. The system, fortunately, is expected to survive but the short-term cost to the economy is projected to be immense. A leading light of the business community tossed a figure of $2 billion (about Rs210bn) to quantify the cost of the accountability process to the economy so far.
The government didnot award any oil and gas exploration lease during the past four years of its tenure, it has been learnt. Although haughty claims were made by various government officials, however ground reality is totally different as no fresh Exploration lease was granted by the Ministry of Petroleum and Natural Resources, official sources told The Nation. Directorate General of Petroleum Concession is responsible for award exploration leases and bringing new investment, however it hasn’t produce any tangible results. There are several challenges faced by the DGPC which includes the shortage of workforce, companies employees are deputed to work in the most sensitive department, delay in reorganisation of DGPC.

The Market is expected to remain volatile today. We advise Traders to exercise caution. Buying on dips and booking gains on strength is recommended.

The Benchmark KSE100 Index penetrated its triangle on daily chart in bearish direction but bounced back after retesting its supportive region at 44300, closing with a positive net change. Having said that, its still capped by a resistant trend line along with a horizontal resistance on daily chart. Daily Stochastic and MAORSI are attempting to generate a bearish crossover which could push the Index back in to negative zone. For the current trading session, the index has resistant regions ahead at 46360 and 46800 after 46100 which has become a strong resistance during the last few trading sessions. If the index slides above this level then it could take a dip towards 45100 and then 44300. Start of a bearish rally this time will lead the index towards 42500 and 40500 if it fails to close above 46800 points, therefore trading with strict stop loss is recommended.

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