KARACHI: Pakistan equities entered free fall mode during the past week, owing to Ex-Premier Nawaz Sharif’s controversial interview over the weekend. KSE-100 Index fell 4.5 percent or 1,971 points week-on-week (WoW) to close at 41,624 points – out of which the Index fell 2.5 percent or 1,096 points on Monday alone. All heavyweight sectors remained in red during the week where Banks, Cements, Fertilizers and Oil & Gas Exploration cumulatively contributed – 1,152 points. In line with the historical slowdown in the month of Ramadan, trading activity tumbled during the week as average daily traded shares/value fell by 31 percent WoW to 115 million. During the week MSCI announced the result of its Semi Annual Index Review (SAIR). As expected, no change was witnessed in Pakistan constituents of the Standard (Large/Mid Cap) Emerging Market Index; however three companies, namely National Refinery (NRL), Pak Elektron (PAEL) and IGI Holdings (IGIHL), were removed from MSCI Small Cap Index. Banking Sector was down 2.4 percent WoW – despite the announced relaxation (via the amended Finance Bill) to even out Super Tax over the years, which should rationalize the “effective” Super Tax from 7% to 4% in 2018. Amongst other sectors related news flow, the Economic Coordination Committee (ECC) of the Cabinet approved increase in Unaccounted for Gas (UFG) benchmark from 5 percent to 7.6 percent for Gas Distribution Companies, applicable for FY13-17. “We do not expect the announcement to have a material impact on recurring profitability, as the change is likely to trigger a restatement of prior year earnings. Nonetheless, materialization of additional cash flows should improve the liquidity position for the both the companies – Sui Northern Gas Pipeline (SNGP) and Sui Southern Gas Co (SSGC)”, said an analyst at Elixir Research Department. Foreigner investors and Mutual Funds continued to be the major net sellers as they sold shares worth USD 20.0 million and USD16.8 million during the week, respectively. This selling was mainly absorbed by Banka and Other Organizations with net buying ofUSD 20.2 million and USD8.9 million, respectively. The market is reeling from risk-off sentiment due to adverse political climate and macroeconomic concerns over the External Account where the SBP’s reserves have already fallen to USD10.8bn. However valuations have started to open up, as that the market has already come off 11% from its 2018 highs. We thus expect Value Buying to emerge in case of further declines, he added. Published in Daily Times, May 20th 2018.