LAHORE  -  A shortened trading week due to Eid holidays saw a lackluster show at the Pakistan Stock Exchange as investors remained on the sidelines ahead of expected material policy action by the new government to tackle twin deficits and declining foreign exchange reserves.

Prime Minister Imran Khan's inaugural address on 19th August highlighted broad context of his action plan in order to address key economic and social challenges, however it failed to ignite investors' sentiment. Moreover, positive news flow on possibility of foreign aid/loans from regional allies including China and Saudi Arabia also appeared during the week citing unconfirmed sources.

Nevertheless, participation remained dull with ADTO dropping by 21 percent WoW to 116million shares while ADTV also declined by 30 percent to $37million. Market closed the week at 42,588 points, up marginally 142pts/0.33 percent WoW.

Foreigners continued to remain net sellers with an outflow of $3.45million, mainly concentrated in cement and E&Ps. Amongst local investors, insurance and mutual funds provided support to the market amid thin volumes, with a cumulative liquidity of $5.62million. On the flip side, companies, bank/DFIs sold stocks worth $3.02m during the week.

On macro front, current account deficit (CAD) for Jul'18 clocked in at $2.2b, up 14 percent YoY, as imports increased (+20 percent YoY) twice the exports (up 10 percent YoY) during the month. Moreover, foreign direct investment (FDI) in the country also recorded a decline of 45 percent YoY during July 2018 to $128.1million

On last day of the week, the PSX closed positive as the index made an intra-day high of +193 and a low of -144 points, respectively, to finally close up at 42,588 points. Market remained range-bound and mixed throughout the session. On the economic front, the country's current account deficit widened by 16.4 per cent during July 2018 as compared to the corresponding period of last year. Moreover, Pakistan is to pay $9.3b in external debt servicing. Financials and energy rallied, while on the flip side cements closed under pressure. In the banking sector, HBL (-0.71 percent) closed in the red, however MCB (+0.94) and UBL (+0.30 percent) closed positive. Likewise, LUCK (+0.09 percent) closed positive but DGKC (-0.71 percent) and FCCL (-0.23 percent) close in the red. Major heavyweights namely OGDC (+0.42 percent), ENGRO (+0.18 percent), MCB (+0.94 percent), UBL (+0.30 percent), LUCK (+0.09 percent), FFC (+1.28 percent), POL (+0.58 percent) and HUBC (+0.84 percent) cumulatively contributed +75 points. Traded volumes decreased by 21 percent DoD to 116m shares, while value traded plummeted to $36million Top volume stocks were UNITY (+5 percent), PREMA (+4.84 percent) and TRG (+4.28 percent).

Moving forward, experts expect market to remain volatile and choppy with flows from local and foreign institutions directing the market.

Despite normalization of trading session, activity is expected to remain low on account of futures roll-over. Also, market shall keenly track developments on materialization of much-hyped external flows along with any concrete action plan to resolve rising CAD and fiscal deficit. The result season is also expected to attract investors' attention in select scrips where FCCL, FATIMA, INDU, NBP, MEBL, BAFL and MARI are schedule to announce their results during the week. Experts highlighted MCB, UBL, PPL, MARI, HUBC, NCL, EFERT, FATIMA, DGKC, and ASTL as preferred picks.

Experts said that despite Moody's comment on Pakistan (that came in market hours) regarding the country being one of the most vulnerable to dollar appreciation and that Pakistan's debt affordability would weaken significantly, the market managed to crawl up by 163 points to 42,588 index level on last day of the week. They believe that this was due to the feel-good-factor post national polls that continued to drive investors' sentiment. The sectors that were top performers included fertilizers, adding 61 points and power generation & distribution which added 27 points to the benchmark index.

Market participation remained depressed as volumes were down 21 percent to 115.9m shares while value traded fell 30 percent to $36.2million

During the week, Crescent Star Insurance (CSIL) announced its consolidated result of 2Q2018 posting LPS of Rs0.59 vs EPS of Rs0.15 in the similar quarter last year. GlaxoSmithKline Consumer Healthcare (GSKCH) Pakistan posted its 2Q2018 result with EPS of Rs1.01 down 40 percent YoY. Pakistan Petroleum Limited (PPL) disclosed via notice on PSX that the company, which is the operator of Gambat South block and has 65 percent working interest, together with its JV partners, Government Holdings Private Ltd and Asia resources Oil limited, which have 25 percent and 10 percent working interest respectively, has discovered gas and condensate from the exploration well, Badeel X-1, located in district Sanghar, Sindh.