The outgoing week at the Karachi Stock Exchange (KSE) saw higher volatility as rumours regarding SECP taking notice of abnormal activity in small cap stocks created uneasiness in the market. It was also the rollover week for futures, while over the weekend the State Bank of Pakistan (SBP) in its first Monetary Policy Statement (MPS) of FY16 kept the policy rate unchanged at 6.5pc. Hence, the KSE-100 index closed the week down 0.2pc WoW at 35,741 with average daily volumes clocking in 39pc WoW lower at 403m shares/day. The Oil & Gas sector (particularly refineries) saw some buying interest for a change as international oil prices edged up slightly, while Pakistan Oilfields Limited (POL) also announced its board meeting date (Aug 13th) for its FY15 results. On the other hand, the Cement sector witnessed some profit taking on expectations of weak dispatches for July 2015. Other key takeaways from the week were: (1) Pakistan-IMF talks on eighth review begins, (2) Pakistan receives $336m under CSF from US, (3) OGRA recommends 3-10pc cut in petroleum product prices, (4) Oil imports fall 21pcYoY to US$14.86bn in FY15, (5) CCP seeks information from Indus Motors (INDU) and Pak Suzuki (PSMC) as part of its on-going inquiry for alleged cartelization, (6) United Bank Limited (UBL) leads Syndicated Term Facility of Rs25.2bn for Karachi-Hyderabad Motorway Project and (7) K-Electric (KEL) given two weeks to submit reply to NERPA’s show cause notice.

According to experts, major gain was seen in Industrial Transportation (8.3pc), Software and Computer Services (6.1pc) and Life Insurance (5.5pc), while major decline was witnessed in Real Estate Investment and Services (16.3pc), Media (4.9pc) and Financial Services (4.4pc), during the outgoing week.

? Local mutual funds were net sellers of US$11.9mn. However, Foreigners, Individuals and Banks were net buyer who bought shares worth $3.0m, $12.9m and $4.5m respectively on a net basis. Major net buying by foreigners during the week was seen in sectors like Commercial Banks ($2.6m), while major net selling was seen in Power ($1.3m).

During the week, country’s liquid foreign exchange reserves stand at US$18.5bn as on July 24, 2015. SBP reserves have decreased by $157m WoW, as SBP has made a payment of $92m on account of external debt servicing.

K-Electric (KEL) announced that it has signed contracts, worth US$400mn, with Siemens (Germany and Pakistan) and Shangai Electric (China) to enhance company transmission system capacity and improve reliability & stability of its infrastructure.

Privatization Commission, headed by Mohammad Zubair, approved appointment of financial advisor to sell 40pc of Govt. stake in Kot Addu Power Company (KAPCO), country largest Independent Power Plant (IPP), led by consortium of Dubai Islamic bank.

Crescent Steel & Allied Products (CSAP) declared FY15 profits of Rs200mn (EPS Rs3.2) versus Rs553mn (EPS Rs8.9) last year. Earnings dipped as 1) Gross margins fell by 482bps to 0.9pc from 5.7pc last year and 2) 50pc decline in investment income.

Exide Pakistan (EXIDE) announced 1Q2015 earnings of Rs273m (EPS Rs35.2) versus earnings Rs216mn (EPS Rs27.7) in the same period last year. The increase in earnings is attributable to 500bps increase in gross margins to 18.2pc, despite 2.5pc YoY decline in sales to Rs4.4b. Shakarganj Limited (SGML) announced 9MFY15 earnings of Rs173m (EPS Rs2.5) as compared to loss of Rs387mn (LPS Rs5.6) in the same period last year. Increase in earnings is attributable to 1) Increase in gross margins, 2) 21pc YoY decline in finance cost and 3) Increase in income from associates (up 234pc YoY).

Experts suggested that during July 2015, total cement dispatches are expected to decline by 2pc to 2.2mn tons. On MoM basis, total sales are likely to fall by 34pc. Cement sales were dull in Jul 2015 on the back of extended Eid holidays.

oreover, heavy downpour in Northern parts of the country further aggravated the situation. Local sales are expected to remain stable at 1.7mn tons in Jul 2015, almost flat YoY, down 37pc MoM. Export dispatches on the other hand will remain depressed and are likely to come down by 12pc YoY to 0.4mn tons. On MoM basis, export sales are expected to fall by 18pc. Historically, local cement dispatches declined by 5-year (FY11-15) avg. of 18pc QoQ during the first quarter of the fiscal year due to monsoon season. Following this trend, we expect local cement sales to decline by 18pc QoQ to 6.5mn tons. However, demand picks up once the rehabilitation program starts. Given the Govt.’s historical focus on infrastructure development and start of mega projects across the country, we anticipate cement demand to clock-in at 8.8mn tons in 2QFY16, up by 36pc QoQ.