Lahore - The stock market remained in the correction mode throughout the week as MSCI euphoria fizzled out with Brexit jitters diverting attention towards global financial markets.

With Britain unpredictably voting in favour of the ‘Leave’ campaign, global markets came crashing down with Pound Sterling and Euro taking a massive hit along with Oil. On the other hand, safe havens like Yen and Gold appreciated significantly. All this culminated into broad based selling at PSX as well, bringing the market down by 2.2 percent in a single day on Friday.

Faizan Ahmed from JS Capital said that investors apparently followed the ‘sell-first-ask-later’ approach towards Brexit vote and aggressively liquidated their positions. The response was greater in sectors like Autos (importers from Japan), Textiles (exporters to Britain & EU) and Oil (decline in oil prices) as they remain direct affectees of this development. Moreover, foreigners also were net sellers during the week by liquidating assets worth US$21mn (net) during the week. Other important highlights of the week were (1) SNGP & SSGC’s announcement to spend Rs71bn to upgrade gas network, (2) heavy monsoon rain forecasts (expected to start from next week - negative for cements and fertilizers) and (3) decline in textile exports (down 7.34 percent YoY in 11MFY16).

FXTM Vice President of Market Research, Jameel Ahmad, commented that the financial markets and spectators across the globe are in a complete state of shock following the unexpected outcome to the EU referendum that the UK has voted to leave the European Union. Markets were completely reliant in the final lead up to the vote on following the bookmakers, who heavily favoured a one-sided remain and as such, were simply positioned for only a remain outcome. He said that investors were guilty of ignoring the consistent opinion polls that repeatedly pointed out that the vote was going to be close and as a result, the possibility of a UK exit had been severely under-priced throughout the financial markets. Make no mistake, around this time last year the markets were in complete pandemonium over what implications a “Grexit” could have on the global markets and the ramifications of a “Brexit” will carry far more severe risks.

What happens next? Jameel Ahmad replied that despite all of this historic movement in the British Pound overnight, this eventual outcome has not been priced into the equity markets, and the open to both the European and US session later today is going to be under the watchful eye of the world. The GBPUSD itself dropped from a cliff overnight, and has recorded historic losses from 1.50 to 1.32 in a matter of hours. It is important to point out that the reason for the GBPUSD falling to such extraordinary levels is not just limited to the UK voting to exit the European Union, investors have been very quick to also price in the uncertainty over the future of UK Prime Minister David Cameron and also the likelihood that this shocking news possibly opens the doors for another Scottish Referendum down the road.

According to experts, global markets crashed on Friday as Britain’s unprecedented vote to leave the European Union rocked world financial markets. As a result Pakistan market also fell 848 points (2.2 percent). Benchmark KSE 100 Index closed at 37,389 level which recovered partially after falling to an intraday low of 36,825 level.

Besides one third foreign holding in free float, investors were concerned that Pakistan exports to UK will be affected after Brexit. Local bourse was dull throughout the week and after Friday collapse, KSE-100 index fell 3.6 percent over the week.

Tobacco and Refinery sector were among the gainers this week as they rose 8.1 percent and 2.2 percent, respectively. Automobile Assemblers, Oil & Gas Exploration Companies and Textile Composite were the losers this week, mainly on due to Brexit’s impact. The sectors fell in the range of 2.2 percent - 4.4 percent this week.

Over the week, foreigners were net sellers of US$20.5mn worth of shares. Selling was seen in Chemicals and Cement sector of US$6.8mn and US$5.5mn, respectively, whereas net buying of US$1.3mn witnessed in Banking sector. 

During the week, Worldcall Telecom (WTL) has received public announcement of intention from Allied Supplies and Services (Pvt.) Ltd and Dunya Technologies Ltd., the company informed through a notice on stock exchange. The offer is for 56.8 percent (488mn) of total issued and paid up capital of WTL and 100 percent (350,000) of convertible preference shares issued by company.