KARACHI: KSE-100 Index fell 4.8% or 1,934 points WoW to close at 38,562 mainly due to higher than expected monetary tightening (150bps interest rate hike), global markets sell-off, fears of redemptions from Mutual Funds and dismal offtake numbers for cement, Automobile & Oil Marketing Sectors. Market activity remained dull during the week with average traded value declining by 18%WoW to USD 53 million in spite of 7% WoW higher average daily traded volumes, reflecting concentration of activity in penny stocks. During the week State Bank’s foreign exchange reserves further slipped by USD 560 million to USD 7.5 billion owing to persistently high Current Account Deficit and external debt servicing in the absence of meaningful financial flows. After remaining depressed for the most part of the week, cement stocks nonetheless recovered on Friday owing to news regarding beginning of construction work on Diamer-Bhasha and Mohmand Dams from June-2019 and March-2019, respectively. Oil Marketing Companies (OMCs) fell 10.2% WoW owing to decline in industry sales in November-2018 on curtailment in FO based power production and fall in retail fuel sales. Exploration and Production (E&Ps) sector was down 4.8% WoW due to uncertainty over production cuts by OPEC in its ongoing meetings. Foreign selling subdued during the week standing at USD 2.5 million compared with USD 51.1 million in previous week (owing to MSCI rebalancing). On domestic front, mutual funds remained the biggest net seller during the week disposing USD 31.1 mllion likely due to redemptions and shift in investments from equity to fixed income funds amidst higher fixed income yields and risk-off sentiment. Most of this selling was absorbed by Insurance companies and Individuals with net buying of USD1 8.9 million and USD12.1 million, respectively. “We expect risk-off sentiment to remain at forefront due to economic slowdown and uncertainty over foreign financial flows. E&P is expected to remain in limelight owing to OPEC’s agreement to cut 1.2mnbpd oil supply which has caused prices to prop up by USD2.5-3/bbl (4-5%) on Friday (with most of these gains clocking in after equity market closed in Pakistan)”, said an analyst at Elixir Research Department. Published in Daily Times, December 9th 2018.