LAHORE -  The stock market remained under pressure for the majority of the week, with the KSE 100-index finally recovering towards the close of the week to finish at 49,851 level (up 1.1 percent WoW). A reason for the positivity towards the end of the week in experts’ view was increased locals' participation in anticipation of foreign inflows as the MSCI inclusion date comes closer. During the week, FIPI registered net selling of $19m. However, average daily volumes fell 26 percent WoW, with noise on the political front continuing to weigh down investor sentiment. Similarly, average daily traded value also clocked in 20 percent WoW lower. Among major sectors, banks were major gainers (up 4 percent WoW) due to a combination of (1) better-than-expectation 1Q results, where FABL remained a star performer, and (2) upcoming inclusion in MSCI (HBL, UBL and MCB). Conversely, E&Ps finished in the red zone (down 2 percent WoW) in line with decline in crude oil prices (WTI down 8 percent WoW).

According to experts, looks like local politics have hit the back burner as investors at the PSX were more concerned with lapping up key MSCI-EM names ahead of the review on May 15, leading up-to the actual upgrade on June 1, 2017. Aggregate average volumes in the six likely MSCI scripts (HBL, UBL, MCB, LUCK, ENGRO & OGDC) have shot up 5 percent WoW, while overall market participation contracted as PSX’s ADT Vol/Val declined 26 percent/20 percent to$136m.

Lo and behold the top index point contributors were indeed our MSCI fav’s with HBL (+5.6 percent WoW), LUCK (+6.3 percent), UBL (+5.7 percent), ENGRO (+5.1 percent), & MCB (+5.6 percent) adding 681pts, while HUBC (-2.4 percent), SEARL (-4.1 percent), MARI (-3.8 percent), POL (-2.6 percent) & SNGP (-2.9 percent) withheld 154pts from the gain. On the sector front; banks outperformed the index with their capitalization growing 3.8 percent WoW as 3 big banks would be included in MSCI-EM; while E&P’s shed 4 percent in value as oil prices crashed on concerns of a persisting supply overhang (WTI’s low today US$43.77/bbl not seen since Nov 15, 2016).

Individuals (+US$27.8mn) were biggest buyers while Foreigners were sellers of US$19.2mn during the week as against selling of US$10.7mn last week; most of the selling was concentrated in Cement (US$5mn), Power (US$2.8mn) & Banks (US$1.8mn), while foreigners bought US$2.9mn of E&P’s.

Going forwards it is expected local investors to drive the market with MSCI names leading the charts, while the real mayhem could begin from May 15th.

According to Bloomberg; Oil Steadies After Slump to Five-Month Low as Shale Subdues OPEC: Oil steadied after tumbling to the lowest level since before OPEC reached an output-reduction deal as U.S. shale confounds the producer group’s attempts to prop up prices. Prices are approaching an 8 percent decline this week, bringing the U.S. benchmark crude back to levels last seen before the Organization of Petroleum Exporting Countries signed a six-month deal in November to curb production and ease a global glut.

The federal government plans to launch another high-voltage power line, from Thar to Lahore, to transmit more than 4,000MW of electricity. The high voltage direct current (HVDC) line of 660 kilovolts will transmit power from future projects in Sindh to load demand centres in Punjab. The project, a part of the next five years’ development plan for the energy sector, may also be included in CPEC in the future, according to WAPDA.

Telecom sector seeks reduction in withholding tax: At a time when the government is giving final touches to proposals for the upcoming budget, the telecom sector is seeking reduction in withholding and sales tax rates in a bid to provide relief to subscribers. In the first budget of PML-N government in 2013, the withholding tax rate was increased to 15 percent from 10 percent. It was reduced to 14 percent in the following year but still emerged as one of the leading sources of revenue for the tax machinery. Withholding tax on telecom at 14 percent is one of the highest as most sectors are paying in the range of 1-5 percent. Official data shows the FBR received Rs48bn as withholding tax in FY16 from 140mn mobile phone users.