LAHORE - Volatile political landscape and concerns over NAB investigations against brokers and industrialists kept sentiments jittery at the Karachi Stock Exchange (KSE) during the outgoing week as average trading volumes plummeted to 17-weeks low of 135 million shares/day (-34 per cent WoW).

Investors completely disregarded macroeconomic developments such as 50bps cut in the discount rate, PM’s relief package for farmers inciting hopes of reversion of gas price hike and Fitch assigning credit rating ‘B’ with stable outlook for Pakistan’s sovereign debt. Moreover, fears of continuous foreign selling and uncertainty over Fed interest rate hike in the region further deterred fresh buying in the market. As a result, the benchmark KSE-100 index closed lower at 32,761, down 2.7 percent WoW. Of the major sectors, E&Ps fell by 5.4 per cent WoW despite rebound in international crude oil prices (+5 per cent WoW to $47/bbl), while banks declined by 4.2 per cent WoW following a cut in policy rate. Other key highlights of the week were: (1) appointment of financial advisors by the Ministry of Finance (MoF) for $500 million Eurobonds issue, (2) cut of Rs2.19/unit in power tariff under monthly fuel price adjustment and (3) T-Bill auction in which govt. raised Rs146bn with cut-off yields going down by 47bps.

Experts said that global financial markets suffered repeated blows during the week amid weak Chinese data and buzz over Fed’s policy meeting. As a result, KSE-100 also plunged. Average daily volumes declined by 34.2 per cent whereas traded value declined by 22.0 per cent to Rs6.3b/$60.5 million. During the outgoing week, foreigners and local mutual funds were major net sellers of $4.7 million and $4.2 million, respectively, while companies were major net buyers of $2.9 million. Major gain was seen in sectors such as support services (5.4 per cent) and electronic & electrical goods (2.0 percent), while major losers were technology hardware & equipment (7.8 per cent) and software & computer services (7.4 percent).

During the week, Fitch Ratings has assigned Pakistan a long-term foreign and local-currency issuer default ratings (IDRs) at ‘B’ with stable outlook. For the short term, the agency has put the foreign currency issuer default rating as well as the country ceiling at ‘B’.

Ministry of Finance (MoF) plans to raise $500 million from the capital market in the ongoing month through the issuance of Eurobonds. Furthermore, MoF has appointed Citigroup, Deutsche Bank and Standard Chartered as joint lead managers. Road shows are likely to be held in US and London from Sep 24-25, 2015.

In T-Bill auction held during the week, govt raised Rs142.5b against the target of Rs250b. Cut-off yields came down by 45-47bps as 3-month T-Bill settled at 6.48 per cent (amount accepted Rs60.9b), 6-month T-Bill at 6.48 per cent (amount accepted Rs81.6b) while the central bank rejected bids against 12-month T-Bill.

According to data released by State Bank of Pakistan (SBP), Pakistan received Foreign Direct Investment (FDI) of US$119.3 million in the first 2 months (Jul-Aug) of FY16, +7.5 percent YoY.

Mari Petroleum Company (MARI) has made a significant crude oil, condensate and natural gas discovery at exploration well Kalabagh-1A in Karak block, Khyber Pakhtunkhwa (KPK). Karak Joint Venture (JV) consists of MARI as an operator with 60 percent working interest while MOL Pakistan has 40 percent working interest as JV partner.

Wyeth Pakistan (WYETH) announced 3Q2015 earnings of Rs23 million (EPS Rs16.1) as against a loss of Rs96 million (LPS Rs67.7) in similar period last year. Earnings improved primarily on the back of lower selling & distribution expense which declined by 67 percent YoY.

Experts said that suspense was finally lifted as the US Federal Open Market Committee (FOMC) announced its much awaited monetary policy, maintaining a status quo in Fed rates. Chairman Janet Yellen has cited lower than targeted inflation numbers and an instable global economic scenario, despite improving economic activity and strong labor market, as the main reasons for holding the fed funds rates constant at 0 percent-0.25 percent range. With the Chairman FOMC reiterating that interest rates will likely increase in CY15, this has again created another bout of uncertainty with a less than enthusiastic reaction from global markets. Commodities’ reaction has been mixed with gold rallying by USD11/oz while oil has remained largely flat. As expected, the Dollar Index fell by 1 percent intraday from its peak level consequent stable rates before recovering slightly. Given that the current policy action (or rather in-action) has only delayed the inevitable rate increase, we believe a big question mark still hangs over fund outflows from Emerging Markets (EM). To note, EMs have witnessed outflows for straight 11 weeks courtesy apprehensions over quantitative tightening by the US as well as structural weaknesses within emerging markets given declining commodity prices. From Pakistan’s vantage, experts believe the market will likely continue to take cue from international markets in tandem with local developments, particularly on the political and regulatory fronts.