LAHORE: The week's sentiments continued to keep the stock market range-bound with KSE-100 index closing at a meager 0.2% WoW amid lackluster volumes mainly due to Eid holidays. Overall lack of optimism due to fears of NAB investigations against high profile industrialists and brokers continued to hamper market performance despite upbeat corporate valuations. Lack of triggers kept market volatile with activity in selective stocks and shaky uptrend, with the weekend closing clocking-in at a meager +62pts to 32,823pts. Of the index heavyweights, E&Ps were knocked down by 2.5% due to volatile international crude oil prices (+2.9% WoW to USD 46.5/bbl) and banks by 0.3% WoW amid lack of triggers and absence of value buyers. Cement sector, on the other hand, witnessed some activity and closed 1.5% WoW higher. Other key highlights of the week were: (1) LSM numbers, which stood 4.67% YoY higher in July-15, (2) release of oil import numbers (down 41%YoY and 39%MoM in Aug 2015; down 35%YoY in 2MFY16), (3) release of textile export numbers (up 11%YoY and 8%MoM in Aug 2015; down 1%YoY in 2MFY16), (4) B3 rating assigned by Moody's to Eurobond offering and (5) 20% YoY decline in cotton arrival numbers.

Stock market expert Faizan Ahmed observed that Asian markets remained volatile on continued worries about Chinese economy. Following the regional market coupled with lack of interest from local investors’ ahead of Eid holidays, KSE remained dull closing 0.2% up WoW. Average daily volumes declined by 8%, whereas traded value declined by 11% to Rs5.6bn/US$53.9mn. During the outgoing week, banks, local mutual funds and foreigners were major net sellers of US$2.0mn, US$1.9mn and US$1.1mn respectively. Major gain was seen in sectors such as Technology Hardware and Equipment (4.7%) and Support Services (4.3%), and Real Estate Investment and Services (4.2%) while major losers were Electronic and Electrical Goods (2.8%) Oil and Gas (2.5%) and Automobile and Parts (2.1%).

According to the latest data released by State bank of Pakistan (SBP), banking spread improved by 4bps to 5.51% due to decline in cost of deposits. On YoY basis, spreads were down by 20bps due to falling interest rates. The spreads are anticipated to come down post cut in policy rate in Sep 2015 however major investment in PIBs (30% of deposits) will provide some support to sector margins in 2015.  

Minister for Finance, Ishaq Dar attended the road shows, organized in connection with launching of Pak Euro Bond and Pakistan expects to raise $500 million through this Eurobond launch.

Large Scale Manufacturing Index (LSM) in Jul 2015 increased by 4.7% YoY as compared to a decline of 0.5% in Jul 2014. Automobile index with a weight of 4.6% in LSM grew by 53% whereas fertilizer and chemical indices were up by 19% and 15% respectively. Experts anticipate LSM growth to increase to 5% in FY16 vs. 3% in FY15 due to macroeconomic recovery and improving energy situation.

Asian Development Bank (ADB) in a report titled "Asian Development Outlook 2015" released on Tuesday stated that Pakistan’s GDP growth rate is expected to edge up to 4.5% in FY16 assuming 1) continued low prices for oil and other commodities and 2) some alleviation of power shortages, especially for manufacturing.

Avanceon (AVN) through its wholly owned subsidiary Avanceon FZE UAE, (Avanceon Group) has entered into firm contracts of US$5.1mn with various clients in Qatar and Saudi Arabia (KSA) regions as per a KSE notice.

According to the data published by SBP, total deposits of the scheduled banks are down by PKR87bn (down 1% MoM) during Aug 2015 to PKR9.0trn compared to PKR9.1trn in Jul 2015, in tandem with M2 decline of 1%. Fall in deposits can be attributed to the seasonal factors in addition to the imposition of Withholding tax (WHT) on all banking transactions, where the customers are opting for alternative channels. Advances of the scheduled banks remained stable at PKR4.6trn, taking ADR of the sector up by 33bps to 51%.

Investments, on the other hand, have witnessed a healthy upsurge of PKR216bn as the banks continue to park their funds in GoP securities.

In a recent event, SBP has slashed policy rate by further 50bps to 6.0%. Stock market experts believe that the said event would bring earning attrition in CY16 by meager 2-4% as the banks have hedged themselves by parking most of their liquidity into longer term PIBs.