LAHORE   -  The benchmark KSE-100 index witnessed a correction during this week, posting an attrition of 373 points or 0.9 percent. Volumes also remained sluggish during the week, as average daily traded volumes declined by 3 percent WoW. On the flip side, average daily value witnessed a massive jump, with 28 percent WoW growth, clocking in at US$71mn. On sector-wise performance, the Refinery sector emerged as one of the laggards, posting a decline of 11 percent WoW primarily on the back of news reports indicating towards rise in Furnace Oil inventories, leading to lowest utilization levels; and if not rectified can lead to closure of manufacturing units. Similarly, investors chose to book profit on the Cement sector (-6.8 percent WoW) after its continued positive momentum in the past couple of weeks. On the other hand, Commercial Banks turned positive, posting a return of +1.8 percent WoW, primarily on the expectation of hike in the Policy Rate. Oil & Gas Exploration Companies (+2.8 percent WoW) also closed positive during the week, whereas international oil prices declined by 7 percent WoW to US$59.85/bbl. Additionally, owing to rebalancing of MSCI-EM stocks Lucky Cement (LUCK, -7.2 percent WoW) and United Bank (UBL, +1.7  percent WoW) remained in the limelight during the week. Net foreign selling accumulated to US$48.4mn during the week, higher than last week's net selling of US$11.3mn as foreigners came to sell Cement (US$20mn) and Banking (US$20mn) stocks.

According to experts, during the month of Nov 2018, the KSE-100 Index lost 1,220 points (or -3 percent). Market participants were mainly disappointed that the Govt. was unable to reach an agreement with the International Monetary Fund (IMF) to immediately receive a bailout package to help overcome the country’s economic challenges. Moreover, US$1bn injection in foreign exchange reserves from Saudi Arabia last week was unable to improve investors’ sentiment.

During the outgoing week, Pakistan Equities remained volatile due to the aforesaid reason. Moreover, the Rupee hit an all time low against the US Dollar (at Rs144) during intraday trading today while investors were anxiously awaiting State Bank of Pakistan’s (SBP) Monetary Policy Statement (MPS). Though MPS statement came after market hours, the central bank raised policy rate by 1.5 percent to 10 percent, taking 2018YTD hike to 4.25 percent. Further, foreign investors were due to re-balance their portfolios in accordance with LUCK and UBL being removed from MSCI’s Global Standard Index Pakistan, which resulted in net foreign selling of US$33mn today, we believe.

International oil prices declined by 24 percent this month, severely hurting E&P’s and OMC’s as they chipped away 735 points, cumulatively, making them the worst performing sectors for the month.

Foreign selling for the month stood at US$100mn, which was the highest in 18 months (2018YTD net foreign selling is US$509mn). This is also the 10th consecutive month of foreign selling. Insurance and Individuals were net buyers of US$62.8mn, cumulatively for the month. 

Pakistan’s foreign exchange reserves surged 6.24 percent to US$14.572bn during the week ended Nov 23 2018. The forex reserves stood at US$13.715bn in the preceding week. The foreign exchange reserves held by the SBP increased US$776 mn to US$8.062bn due to official bilateral inflows, the SBP said. The foreign exchange reserves rose to US$6.510bn from US$6.428bn in the previous week.

During the week, the Petroleum Division agreed to change pricing mechanism for liquefied petroleum gas (LPG) to provide a level playing field to importers and local suppliers, ultimately benefitting consumers.

The Monetary and Fiscal Policies Coordination Board expressed serious concern over the growing budget deficit and inflation, increasing government borrowing from the SBP and sluggish revenue performance.

Oil prices slipped further as swelling inventories depressed sentiment despite widespread expectations that OPEC and Russia would agree some form of production cut next week.