Daily Times

Pakistan Stock exchange witnessed a volatile session on the first trading day of the week as benchmark KSE-100 index closed flat.

The volatility in the stock market was triggered by political uncertainty after MQM leader announced his surprise resignation as federal minister for information technology. After the general elections in August 2018, PTI and the MQM-P had signed a nine-point memorandum of understanding (MoU) following which the latter joined the PTI-led coalition government in Centre and was also assigned two federal ministries – those of information technology and law. Siddiqui’s announcement came just weeks after PPP chairman Bilawal Bhutto-Zardari’s public offer that the PPP was ready to embrace the MQM-P as a coalition partner in Sindh provided it helped the opposition in bringing down the PTI-led federal government. However, the speculations were downplayed by Mr Siddiue after meeting a delegation of the ruling Pakistan Tehreek-i-Insaf (PTI) led by Planning Minister Asad Umar in Karachi. He reiterated that his party would remain an ally of the government. Both Umar and Siddiqui told reporters that today’s meeting was pre-planned, rubbishing rumours that the latter was retrieving his resignation.

Gaining 246.29 points, the KSE-100 Index recorded its intraday high at 43,453.34 during the early trading hours. It then pared its early gains, to record intraday low at 43,037.72 after losing 169.33 points. The index ended 11.62 points higher to clock at 43,218.67. The KMI-30 Index closed lower by 148.67 points at 70,641.56, while the KSE All Share Index fell short by 37.47 points, settling at 30,020.98. The overall market volumes were recorded at 366.14 million.

The volume chart was led by The Bank of Punjab ,Summit Bank Limited and Silk Bank Limited exchanging 34.97 million, 34.94 million and 24.79 million shares, respectively. While the Sectors that dampened pulled down the KSE-100 Index include tobacco, fertiliser and power generation & distribution. On the other hand, banking, oil & gas exploration and textile composite sectors helped the index finish in the green zone. Meanwhile, International credit rating agency Fitch Ratings has affirmed Pakistan’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘B-‘ with a ‘Stable Outlook’. Fitch stated that Pakistan’s ‘B-‘ rating reflects a challenging external position characterised by a high external financing requirement and low reserves; weak public finances, including large fiscal deficits and a high government debt-to-GDP ratio; and weak governance indicators.

Fitch highlighted that external vulnerabilities have been reduced over the past year as a result of policy actions by the authorities and financing unlocked through an International Monetary Fund (IMF) programme, which helped reduce the current account deficit and supported a modest rebuilding of reserves.

The agency forecast a further narrowing of the current account deficit to 2.1pc of Gross Domestic Product (GDP) in the year ending June 2020 (FY20) and 1.9pc in FY21, from 4.9pc in the last fiscal year. The report said “Import compression remains the predominant driver of the narrowing deficit, facilitated by a depreciation of the rupee against the US dollar of around 30pc since December 2017 and tighter monetary conditions. Exports are forecast to grow modestly from a low base.”

The report indicated tighter macroeconomic policies are further slowing GDP growth, which Fitch forecasts at 2.8pc in FY20 from 3.3pc in FY19.It said “We expect growth to recover gradually to 3.4pc by FY21. Inflation has also continued to rise sharply from the cost pass-through of the currency depreciation and increases in energy tariffs. Fitch forecasts inflation to average 11.3pc in FY20 compared with 6.8pc in FY19. The SBP is likely to keep the policy rate at the current peak of 13.25pc in the coming months, before modest cuts towards the end of FY20 as inflationary pressures would begin to fade.”

In Asia: Stock markets edge higher as investors await the signing of a phase-one trade deal between the US and China. US President Donald Trump and Chinese officials are due to sign the long-awaited phase one trade deal between both countries on January 15th , which have been embroiled in a long-running trade dispute. China’s Vice Premier Liu He, who leads the Chinese negotiation team in the trade talks, is visiting Washington from January 13th , the country’s commerce ministry said. The deal will involve some tariff relief, increased Chinese purchases of US agricultural goods and changes to intellectual property and technology rules. Investors led fresh rally as the Asian stocks touch new 19- month high. Hong Kong’s Hang Seng led the gains in the region as it gained 1.11% to close at 28954.94 points. Tech picked up the index, with Sunny Optical rising 2.61% and Lenovo surging 3.20%. Gaming company Razer shot up almost 10% in the morning before paring gains to last rise 8.33%. The company earlier announced that it had submitted an application for a digital banking license in Singapore. In South Korea cosmetic stocks drove up Kospiindex, closing 1.04% higher at 2229.26. While in China Shanghai Composite closed at a near 2-year high as Investors are anticipating positive data figures from the economic data due to be released this week.