According to BMA Research, a volatile session was witnessed at the local bourse over the course of the outgoing week where multiple sector specific, political and macroeconomic developments kept investors jittery. During the earlier part of the week, news flow emerged pointing towards finalization of a potential bailout package with the IMF, however, investors remained unfazed by the development as FATF imposed a stringent condition of documenting the country’s total bullion trade.

Further into the week, rumors surfaced of the govt. considering to merge all its bank accounts into a “Treasury Single Account” maintained at the central bank (at the behest of the IMF) with potential negative implications for the country’s banking sector and select state owned banks in particular (BOP, BOK & NBP ended the week down 7%, 1% and 1%, respectively). However, by far the most significant development occurred towards the end of the week where federal finance minister and key member of the ruling party Mr. Asad Umer along with few other members were relieved/reshuffled from their respective positions. Resultantly, the market ended the week flat at 37,292 points (down a meager 0.1% WoW). The upturn in volatility translated into higher market activity at the bourse as evident by 18% and 16% WoW increase in ADTO and ADTV to 176mn shares and USD39mn, respectively.        

Multiple macro data points were also reported during the week. Chief among those was Current Account Deficit (CAD) that was reported at USD9.5bn in 9MFY19, down 29% YoY. On the other hand, FDI dropped 51% YoY to USD1.3bn during 9MFY19. Furthermore, forex reserves held by the central bank plunged to USD9.2bn on the back of USD1.03bn principal payment made of a maturing Eurobond.

Foreign investors continued to reduce their Pakistan holdings during the outgoing week, selling scrips worth USD1.9mn. This was mainly tilted towards E&Ps (USD5.3mn) whereas Cements (USD3.3mn) witnessed net inflow. On the local front, companies and individuals provided most of the liquidity to the market.

Outlook: In the upcoming week, market participants are likely to keenly track, (i) likely course of action to be taken by the incoming finance minister (Dr. Abdul Hafeez Shaikh likely), (ii) finer details of the final IMF package, and (iii) financial result of key blue chip companies (PSMC, FATIMA, EPCL, UBL, FFBL, HBL, MCB, MLCF, ENGRO, ABL, INDU, KAPCO, LUCK and OGDC). Our top ten picks are PPL, MARI, MCB, UBL, EFERT, NML, LUCK, HUBC, FATIMA, and EPCL.