LAHORE - Lackluster activity prevailed at the bourse again with KSE-100 index plummeting by 1.4 percent WoW to close at 40,844. Most of the euphoria witnessed during the last week (strong mutual fund buying) fizzled out as political headwinds took charge of affairs.

Unsettling news over timing of elections, ongoing court cases (involving ex-prime minister, finance minister and Imran Khan etc) made perfect cocktail to keep investors wary of making fresh investments. Matters on macroeconomic front also remained unexciting as released trade deficit numbers for 4MFY18 posted a whopping increase of 31.24 percent YoY mainly on account of dull exports and rising imports. Keeping weak outlook into consideration, mutual funds and banks turned into net sellers of $16 million and $4 million worth of equities, respectively. That said almost all index heavyweights such as Oil & Gas marketing (-4.5 percent WoW), Oil & Gas exploration (-1.9 percent WoW), Fertilisers (-2.7 percent WoW) and Banks (-1.4 percent WoW) witnessed selling pressure during the week.

Experts said that index remained dreary during the week amid lack of triggers and continued political uncertainty. Major development during the week was MSCI EM semi-annual review whereby Pakistan’s weight in the index was reduced to 0.09 percent from 0.12 percent in August 2017 following downgrade of Engro Corporation (ENGRO) from MSCI EM Index to MSCI EM Small Cap index. Index closed the week at 40,844 levels (down 1.4 percent/591 points WoW) amid thin volumes.

The range bound activity during the week was primarily dominated by small and mid-cap stocks, where Azgard Nine Ltd and TRG Pakistan Ltd were volume drivers. Engro also topped the volume charts as a result of negative sentiment arising out of its downgrade from MSCI EM Pakistan and later value buying. Overall, ADTO reduced by 7 percent to clock-in at 106 million shares while ADTV clocked-in at $51 million (down 15 percent WoW). Encouragingly, foreigners remained net buyers with a net inflow of $1.13 million during the week. Conversely, mutual funds sold heavily, draining 16 million from the market while insurance ($8.1m) and companies ($5.0m) remained net buyers.

Key sector-related news flow during the week include, release of latest sales numbers by Pakistan Automotive Manufacturers Association (PAMA) whereby auto sales jumped by 24 percent MoM to highest ever monthly sales figure of 23,341units, DAP prices were increased by Rs50-80 per bag leading to selective interest in fertiliser names, PSO took a hit of -5.5 percent during the week following news of increase in receivables to Rs307 billion and halt of furnace oil supplies, and downward spiral in international crude oil prices following uncertainties expressed by International Energy Agency over talks of tightening fuel market led to 3.2 percent decline in oil & gas sector.

On macro front, Pakistan's trade deficit increased to a whopping $12.1 billion during 4MFY18 where deficit in October 2017 alone was recorded at $3.04 billion (up 36 percent YoY). The country's liquid foreign exchange reserves maintained downward trend to stand at $19.69 billion (down by $217 million due to external debt servicing). On a positive note, Foreign Direct Investment (FDI) surged 74 percent in 4MFY18 to $938 billion courtesy heavy investment from China.

It is expected the range bound and volatile trading to prevail in the upcoming week in the backdrop of trigger-less market. Key data points to watch out for include Current Account number for October 17, textile exports data, and power generation numbers. While the market is expected to continue its search for triggers experts recommend PPL, MARI, EFERT, FFC, NCL, NML, UBL, MCB, HUBC and NCPL as preferred picks.