LAHORE The surprise cut in SBP Discount Rate spurred the equity market activity during the outgoing week with fertilizer stocks continuing to shine amidst hopes of above expectations earnings and healthy payout in the upcoming results. According to stock market experts, the week began on a bullish note for the KSE on the back of SBPs decision to slash the policy rate by 150bps against markets expectation of a 50-100bps rate cut. However, realization of heightened macro economic risks tamed the excitement of the investors as the KSE-100 index gained only 134 points, up 1.1 percent WoW. SBPs surprising decision spurred market liquidity with average volumes improving to 125 million shares, an increase of 66 percent WoW. Release of disappointing macroeconomic indicators kept investors cautious as foreigners remained net sellers of $2.8 million. Macro indicators showed a worsening trend as trade deficit widened by 28.78 percent YoY to $5.1 billion during 1QFY12. Import growth (23.1 percent YoY) outmatched growth in exports (18.7 percent YoY) to $11.1 billion while exports were reported at $6 billion. Remittances too showed a deteriorating trend which declined by 32 percent MoM to $890 million in September 2011. However in 1QFY12, remittances have jumped by 24.6 percent YoY to US$3.3 billion. On a positive note, cut-off yield for 10 year PIB fell by 101bps to 12.24 percent, owing to the discount rate cut while the Pak Rupee hit a two month high after falling to an all-time low in September this year. Furqan Ayub, an analyst, said that increase in fertilizer prices and the upcoming corporate announcements triggered a bullish rally in Fatima, FFC and FFBL, all outperforming the market by 14.8 percent, 8.8 percent and 4.2 percent respectively. APL also outperformed the market by 11.6 percent as investors await the result announcement of Attock group companies next week. High cement prices also prompted Lucky to outperform the market by 7.1 percent. On the other hand, blue chip banking stocks like UBL and NBP underperformed the market by 6.0 percent and 8.3 percent respectively, on fears of a decline in banking spreads after the cut in discount rate. Samar Iqbal, Equity Dealer at Topline Securities observed that ahead of quarterly results announcement local bourse closed on positive notes. Fertilizer stocks continued to shine amid hopes of above expectations earnings and healthy payout in the upcoming results. Renewed buying interest in Attock group stocks was also seen on the back of their result announcements early next week. Experts said that the bourses lost 5.9 percent in value during 3Q2011, its sharpest fall since 4Q2008. Nevertheless, the KSE-100 managed to smartly outperform its regional peers by an average 7 percent thanks to impressive corporate result announcements and lower than anticipated inflation figure, hinting towards cut in the discount rate in the upcoming policy review. Atif Zafar said that while the strong fundamentals remain intact, concerns over US-Pak relationship and global economic outlook are likely to influence market sentiments, going forward. He highlighted key defensive plays in HUBCO, FFBL and FFC, and maintained positive bias towards POL, PPL, PSO, ENGRO, LUCK and NBP. He said that fertilizer stocks were yet again the star performers in 3Q2011, with FFBL, FATIMA and FFC outperforming the index by a respective 50 percent, 19 percent and 17 percent on the back of strong corporate result announcements for 2Q (FFBL and FFC earnings rising by an average 84 percent YoY in 2Q) and expectation of further growth in the forthcoming quarter. BAFL and SSGC also gained 18 percent and 14 percent, respectively owing to better than expected earning announcements, while LUCK outperformed the index by 18 percent because of expected improvement in margins thanks to rising prices in the domestic market. MCB, OGDC and PTC were notable laggards, down 12 percent, 12 percent and 18 percent respectively. Ahsan Mehanti pointed out that bullish activity witnessed after positive reports on Pak-US relations as government met US envoy in the federal capital to work together. Rising local fertilizer prices, cement prices and higher oil refinery margins lead the rally in commodity stocks. Recovery in global stocks, rupee stability and falling government bond yields played a catalyst role in positive sentiment in the earnings announcement session at KSE despite concerns for gas shortfall for industrial sector.