LAHORE -  The positive momentum of last week helped the market record gains during the first three trading days aided by news of US and Pakistan agreeing to resume bilateral talks. However, the bourse failed to sustain the rally as profit-taking was witnessed on Thursday over news that the Lahore High Court has ordered the Punjab government to make the Model Town incident report public. There were also media reports circulating during the week that the finance minister has decided to step down from his position. This all coincided with strong technical resistance of the benchmark KSE-100 index at around 43,500, with the index finally closing at 42,750 points (down 0.1 percent WoW).

Key sectors that outperformed were refineries (+4 percent WoW) and fertilizers (+3 percent WoW), whereas sectors that underperformed were cements (-3 percent WoW) and oil & gas exploration (-1 percent WoW). The overall activity at the bourse improved as the average daily volumes and traded value picked up to reasonable levels of 171m shares/day (+9 percent WoW) and $85m/day (+3 percent WoW), respectively. Key buyers were banks/DFIs with net buying of $2.6m, while foreigners were also net buyers of $0.4m during the week. On the economic front, it was a mixed bag as positives of (1) reduction in current account deficit to $550m in Aug-2017 from $2,051m in Jul-2017, (2) improvement in foreign direct investment (FDI) by 155 percent YoY to $457m in 2MFY18 and (3) growth of 13 percent YoY in large scale manufacturing (LSM) during July-2017 was offset by news of International Centre for Settlement of Investment Disputes (ICSID) awarding case in favor of a Turkish firm M/s Karkey Karadeniz Elektrik Uretim and imposing a fine of $800m on Pakistan.

According to experts, the KSE-index went nowhere during the outgoing week as investors were in search of sunrise as political clouds rebuild. Market participation improved as investors looked to gamble in penny stocks, average volumes were up 9 percent while value rose 3 percent.

Top KSE-100 index point contributions came from DAWH (+9 percent WoW), MCB (+4 percent), FFC (+6 percent), NESTLE (+4 percent) & UBL (+4 percent) which added 298pts; while HBL (-5 percent), LUCK (-4 percent), MEBL (-8 percent), SNGP (-5 percent), & OGDC (-2 percent) withheld 337pts.

On the sector front, refinery was up 4 percent WoW led by NRL (+5 percent) & ATRL (+6 percent), pharmaceuticals & fertilizer gained 3 percent apiece, while food was up 2 percent. On the flip side, cements shed 3 percent, E&Ps were down a percent while banks were flat (-0.3 percent).

During the outgoing week, insurance companies loaded up $4.2m worth of Pak equities, while mutual funds offloaded $4.5m. Foreigners remained on the sidelines with net buying of only $0.4m as compared to buying of $27.7m last week. Foreign buying was concentrated in fertilizer ($4.8m) in line with the global rally sparked by higher prices, followed by OMCs ($1.7m) & cement ($1.6m), while foreigners sold $4.2m worth of E&P’s followed by power ($1.4m).

During the week, meeting of OPEC and its allies in Vienna concluded without any recommendation to extend output cuts. OPEC & Russia said they were about halfway toward clearing oil glut and urged fellow producers to stay focused and finish the job, without making any immediate changes to their agreement.

Chinese prices of steel and its raw materials iron ore and coking coal slid to multi-week lows on Friday and were set to post their steepest weekly losses in months, pressured by slower demand and S&P’s downgrade of China’s rating. “Demand for iron ore is expected to weaken in winter because steel factories will cut production and iron ore supply will rise as global miners produce more during the last quarter of the year.” said a Chinese trader.

Pakistan has made a fresh request to Turkish company Karkey Karadeniz Elektrik Uretim (KKEU) that constructs and operates rental power plants to not disclose details of the International Centre for Settlement of Investment Disputes (ICSID) award against it for one month.

SBP released details for Aug’17 imports (+9 percent/$355m YoY to $4.262b); highest increase registered in iron & steel, up 108 percent YoY or $167m to $321m, followed by mineral fuels, oils & distillates (+15 percent YoY/ $142m to $1.1b). Imports were down 10 percent on MoM basis or $458m.