LAHORE - Investor sentiment readings continued to worsen as KSE-100 index plummeted again to close at 41,105 points (down 2.3 percent WoW). Lack of clarity on the political landscape played a major role in deteriorating sentiments even more. On the macroeconomic front as well, issues over Rs/$ parity and likely direction of economic policies also continued to haunt investors.

As a result, liquidity dried up as average traded volume and value declined by 27 percent WoW (134m vis-a-vis 185m in the last week) and 24 percent WoW ($66m recorded during the week). As for flows, mutual funds remained the major net sellers of $11 million worth of equities during the week whereas individuals jumped to the other side to buy at bargain prices. Almost all major sectors such as cements (down 4 percent WoW on uncertain pricing scenario), oil & gas exploration companies (down 3 percent WoW), banks (down 3 percent WoW) etc witnessed a decline.

Experts said that equities remained under pressure during the future roll over week and closed on a dull note (down by 2.1pc/900points) on WoW basis. Majority of the results came in line with expectations with companies making decent payouts. During the week there have been few positive surprises such as SNGPL with higher than expected cumulative cash dividend of Rs7.5. There were certain disappointments like PAEL which posted earnings of Rs0.5 per share, down by 70 percent.

Stocks including ENGRO (-6 percent WoW), PAEL (-18 percent WoW), OGDC (-3 percent WoW), HBL (-2 percent WoW) and DGKC (-8 percent), eroded 373 points from the index. On the other hand, DAWH (+5 percent WoW), PAKT (+7 percent WoW), FFC (+2 percent WoW), POL (+1 percent WoW) and SNGPL (+2 percent WoW) added 126 points to the index.

Amongst major sectors, tobacco and pharmaceutical sectors surged by 5 percent and 3 percent, respectively. In contrast, refinery, cement & commercial banks were down 6 percent, 4 percent and 3 percent, respectively. During the outgoing week Mutual Funds sold $11.3 million worth of equities while individuals bought $16.3 million worth of stocks. Foreigners were net sellers of $5.3 million during the week vs net selling of $7.4 million during last week. Foreigners sold $3.8 million and $2.0 million worth of stocks in fertiliser and E&P sectors respectively whereas $1.8 million and $1.4 million of shares were bought in cement and banking sectors.

As per NFDC data, domestic Urea off take for September 2017 clocked in at 1,79,000 tons, down 40 percent. This is in-line with our forecast. The industry managed to export 1,24,000 tons, while production reduced 16 percent YoY/QoQ to 4,30,000 tons due to EFERT and AGL plant shutdown, resultantly inventory build-up was restricted to 7,33,000 tons. For October 2017 we expect domestic off take of 2,00,000 tons and exports of 1,00,000 tons, while inventory would swell by 1,00,000 tons to 8,00,000 tons.

Dawood Hercules (DAWH) executed SPA to divest its 14.91 percent stake in Hub Power Company (HUBC) at Rs109.86 per share (valued at Rs19b) to Kot Addu Power Company (KAPCO). We had earlier highlighted this in our report titled “DAWH - Venturing into Digital Real Estate”. Pakistan Petroleum Limited (PPL) disclosed its 1QFY18 result where it posted earnings of Rs12.6 billion (EPS Rs6.48), up 121 percent YoY as earnings were boosted by reversal in exploration expense. Revenues grew by 71 percent due to higher well head prices, one off Rs4.2 billion revenues attributable to retrospective impact of well head price revision for TAL block field and growth in production.

PPL also notified that pursuant to the settlement agreements (executed on March 17, 2017) between the company and Asia Resource Oil Limited (AROL), a sum of $54.8 million was paid by AROL in respect of its outstanding liabilities for Gambat and Kotri blocks. However, AROL did not pay the settlement amount in respect of Nasharo Firoz Block and in accordance in terms of settlement agreement AROL 10 percent working interest therein would stand irrevocably forfeited in favour of PPL. Dawood Hercules reported earnings of Rs1.1 billion attributable to owners (EPS Rs2.4) in 3Q2017 up by 53 percent from Rs751 million YoY. Glaxo Smithkline (GLAXO) announced its 3QCY17 earning of Rs2.5 per share, up 9 percent YoY. Topline increased by 11 percent YoY, while gross margins have remained flat at around 27.5 percent YoY. The company along with its results announced a cash dividend of Rs3 per share.