LAHORE - Stock market participants let bears take control during the week as the KSE 100-index declined by 2 percent WoW, closing at 41,742 points. Investors remained lukewarm during the week as they awaited clarity over guidelines on the current economic scenario from the new government.

Major sectors that led the decline were cements (-6.6 percent WoW) and power (-4.1 percent WoW). Moreover, fertilizer sector declined by 4 percent WoW during the week on the news of the government planning to make fertilizer companies return Rs10b windfalls that they earned out of subsidy. However, volumes rebounded after low base of last week's Eid season, with average daily traded volume registering 35 percent WoW growth, with value traded clocking in 39 percent WoW higher to $61m.

Foreigners remained net sellers during the week with bulk selling witnessed in the banking (US$3.8m) and oil and gas exploration (US$6.3m) sectors. The new government held its first Economic Coordination Committee (ECC) meeting during the week with key agendas such as current gas pricing, circular debt, and fertilizer inventory. Decisions over some of the aforementioned agendas have been deferred to next week.

Experts said that Pakistan equities remained under pressure during the outgoing week as investors anxiously waited for clarity over new govt’s economic policies and the steps required to be taken to deal with Balance of Payment (BoP) situation. However, the economic roadmap has yet to be presented. Also, selloff in emerging markets deepened as Argentina and Turkey struggled to shore up global investor confidence.

Due to aforementioned reasons, KSE-100 index declined by 2 percent WoW as compared to a decline of 1 percent seen during the week ending Aug 17 2018 (pre-Eid). On monthly basis, market declined by 2.3 percent.

Fertilizer, cement and power chipped away 223 points, 224 points and 111 points respectively from the index. Fertilizer stocks were battered after ECC’s comment to collect Rs10b windfall from fertilizer industry. Foreigners sold US$10m worth of shares during the week vs net selling of US$6.5m during the same period last week. On local front, insurance companies were net buyers amounting to US$8.4m. During Aug 2018, foreigners sold US$67.4m worth of shares, second highest in a month in 2018 to date.

According to State Bank of Pakistan's (SBP) weekly report, the country's total liquid foreign exchange reserves stood at US$16.685b as on Aug 24, 2018 compared to US$16.723b as on Aug 17, 2018. During the week under review, SBP's reserves decreased by US$8m to US$10.227b down from US$10.235b. Reserves held by the banks also declined by $30m to US$6.458b end of the last week.

The federal govt during the week borrowed Rs30b through the auction for short-term bonds. The State Bank of Pakistan (SBP) conducted the auction for Market Treasury Bills (MTBs) on August 29, 2018 for the sale of 3-month, 6-month and 12-month bills.

However, participation was very thin and overall, bids amounting to Rs33.282b with a realized value of Rs32.698b were received only for 3-month tenor.

During the week, newly appointed Finance Minister Asad Umar told the Senate that addressing the deficiencies identified by the Financial Action Task Force (FATF) is in Pakistan's own best interest, and that he views the issue as "more an opportunity than a challenge.

In Jun 2018, the FATF had demoted Pakistan to its grey list, putting the country just one step away from its dreaded blacklist, which brings with it international sanctions and economic repercussions among other things. Asad Umar also said “Pakistan, as per the budget, needs US$9bn to run the country. We are trying to address the root cause that compels us to borrow these $9bn. Off course, we know any policy will take time to yield results,” he added.