LAHORE – Overall interest remained weak as the investors remained reluctant to take fresh positions in heavyweight sectors such as oil & gas due to volatile crude oil prices and banks that witnessed correction over the week.

The cement sector also witnessed bearish spell after announcement by the DG Khan Cement (DGKC) to lay another line of 2.3 million tonnes at its Dera Ghazi Khan plant, increasing fears about large expansion cycle in the industry, which could potentially lead to price wars among the players.

Moreover, rumours of the Chinese planning investment in the cement sector put further pressure, resulting in -5.5 percent WoW performance of the broader sector.

The overall participation remained strong and mainly tilted towards third tier stocks, with average volumes and value traded increasing by 60 percent WoW and 25 percent WoW, respectively.

Foreigners again turned out to be net sellers ($3.4 million of net selling recorded) but strong participation by the local market more than absorbed rampant selling.

FXTM research analyst Lukman Otunuga commented that a sense of anticipation had firmly gripped the financial markets on Friday as investors were awaiting the Non-Farm payrolls report for August which could provide to them clarity on when the Federal Reserve planned to raise US rates in 2016.

He said that global stocks remained mixed with most major markets on a standby as anxious investors observed from a distance ahead of the market shaking employment report.

Asian equities had already drifted lower on Friday and this caution could trickle into Europe consequently leaving European stocks vulnerable to losses. Wall Street was punished on Thursday by the downbeat US manufacturing data that rekindled concerns over the US economy with further losses expected as investors’ jitters intensifying ahead of the NFP.

Otunuga observed that the over-extended stock market rally might be displaying signs of exhaustion with September being a potential month when bears emerge from hibernation.

Although the heightened expectations of the Fed raising US interest rates had somewhat elevated global sentiment, the persisting concerns over the health of global economy are still lingering in the background. Prolonged periods of depressed oil prices have eroded investor risk appetite, while uncertainty is still a recurrent theme which has left market participants on edge. “With volatility making a comeback it could take an unexpected catalyst to trigger a steep stock market selloff,” he said.

He said that conventional wisdom held that a strong dollar was problematic for stocks, which should keep investors alert as hopes heightened over the Fed taking action this year.

After crossing the 40,000 index mark at the start of the week, profit taking in index heavyweight banking and oil & gas exploration sectors resulted in a decline in benchmark KSE-100 index.

The correction resulted in the index falling 1.2 percent to close at 39,464 index level this week.

The average daily volume increased 60 percent YoY to 371.7 million shares while the average daily value rose 25 percent to Rs12.7 billion/ $121 million during the week.Automobile Assembler was among the top gainers over the week, up 7 percent, followed by refinery and oil & gas marketing companies, which increased 1.2 percent and 1.1 percent, respectively. The oil & gas exploration, pharmaceuticals and cement sectors were among the losers.

Foreigners were the net sellers of $3.3 million worth of shares during the week. Stocks in the food & personal care products sectors witnessed net selling of $14.8 million during the week, while net buying of $5.8 million was seen in banking stocks. During the week, the central bank governor had presented a positive outlook on workers’ remittances. He had stated that the number of Pakistanis who had proceeded abroad increased 16.3 percent YoY in FY16.

He had pointed out that the country will not face any issue in meeting foreign payment obligations as its annual debt servicing obligations were not more that $5 billion until 2020.

Loads Ltd., an auto parts supplier, plans the first initial public offering from Pakistan’s automotive industry since 2000. This is meant to expand its capacity, as the company expects demand for cars to more than double in four years. The component maker seeks to raise about Rs1 billion ($9.5 million) from the IPO.  In a PSX notice, K-Electric (KEL) notified that KES Power Ltd. (majority shareholder in the company) informed that Abraaj was evaluating the possibility of divesting (directly or indirectly) its shareholding in KEL. This will be subject to a prescribed sale process, due diligence and execution of binding documentation. As per PSX notice, Fauji Cement (FCCL) informed that Line 1 of their cement production capacity was made operational on 15th June 2016.

In addition, rehabilitation of line 2 had been initiated, for which procurement of materials and spare-parts was already underway.

The Board of Directors of Kohat Cement (KOHC) has directed the management to explore opportunities  for setting up a green field / brown field cement production line of up to 2.3 million tonnes per annum capacity.

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