LAHORE - After closing on an all-time high last week, the market witnessed correction during the outgoing week amidst rising tensions between Pakistan and India, which was further exacerbated by margin calls on leveraged positions.

Overall, the benchmark, KSE-100 index, ended the week down by 582 points (-1.4 percent WoW) to close at 39,782 points as most retail investors (individuals: net sellers of $11 million during the outgoing week) booked profits post strong rally, especially in third tier stocks.

Also, foreigners remained net sellers of around $16 million due to redemptions in frontier market funds and escalating tensions with India.

Of the key sectors, overall buzz remained concentrated in third tier scrips with average volumes and value increasing by 5.3 percent WoW and 25 percent WoW, respectively.

Faizan Ahmed, a stock market expert, said that local mutual funds (Net Buy of $1.1 million) and banks (Net Buy of $7.8 million) continued to absorb most of this selling pressure, curtailing market decline.

FXTM VP of Market Research Jameel Ahmad commented that while the Federal Reserve interest rate decision was making headlines, the major market action this week had been in the Japanese Yen where traders had once again rejected the efforts by the Bank of Japan (BoJ) to remove weakness in the Yen.

Despite the fact that BoJ is making a significant change to its policy framework that some are seeing as a different direction given to monetary easing from a central bank, the investors have rejected the efforts in a spectacular fashion due to which USDJPY returning to the major psychological level of around 100.

Ahmad further said that Yen had weakened since then with the USDJPY returning just above 101.230 in the early hours of trading on Friday, but the reason for this could be that the BoJ intervened in the markets following the USDJPY meeting a major support level.

“I also maintain the view that there is very little BoJ can do to encourage a return to Yen weakness in spite of any detrimental impacts that the fascinating Yen correction has had on an already-struggling Japanese economy,” he opined.

According to experts, activity at the local bourse was driven essentially by political tension between India and Pakistan and rumours of investors facing margin calls.

Although political tensions eased towards the end of the week, foreign selling led the index declining to 39,782 levels, down 582 points (1.4 percent) WoW.

Average daily volumes for the outgoing week increased 5 percent WoW to 728 million shares while average daily value rose 18 percent WoW to Rs17 billion/ $158 million during the week.

Tobacco was the top gainer over the week, up 5.3, followed by Cement and Automobile Assembler, which increased 1.4 percent and 1 percent, respectively.

Fertiliser and commercial banks sectors were amongst the top losers as they fell 4.6 percent and 1.7 percent, respectively.

Foreigners were net sellers of $16 million during the week. Chemical and banking sectors witnessed net selling of $7.3 million and $5.8 million respectively, whereas net buying of $1.8 million and $1.5 million was seen in the textile and food sectors.

Important News, Views & Corporate Announcements

During the week, IGI Insurance (IGIIL) disclosed information regarding restructuring of the IGI Group. It is proposed that IGI Investment Bank be merged into IGI Insurance, demerger of the insurance division and certain investments along with corresponding liabilities into two wholly owned subsidiaries of IGIIL and the remaining assets and liabilities of IGIIL to be retained by IGIIL.

Limited (PKGS), in its PSX announcement, informed that the Board of Directors (BoD) had approved a proposal for exploring the development of a 3.1MW hydropower project.

Dewan Cement (DCL), in a PSX notification, informed that, they had received a request for due diligence of the company by a Chinese strategic investor, which may eventually lead to acquisition of shares of DCL. The company intends to permit the due diligence.

Pakistan Petroleum (PPL) in a PSX notification, informed investors of a hydrocarbon discovery from its exploratory well Bashar X-1 ST. Gas flowed at a rate of 8.7mmcfd.

In its PSX notice, K-Electric (KEL) confirmed that the company had only submitted an Expression of Interest (EOI) to the Privatisation Commission (PC) with reference to the divestment of Government of Pakistan’s shares in Kot Addu Power Company (KAPCO). The submission of bid, if any, shall be subject to due diligence.

The government is targeting investment and savings at 17.7 percent of gross domestic product (GDP) during the ongoing FY17. Fixed investment is expected to grow at 16.1 percent of the GDP in FY17, whereas the national savings is targeted at 16.2%.

The investment under the China-Pakistan Economic Corridor (CPEC) is expected to improve the overall investment climate in the country.