Market Close !

Pakistan equities closed down -1.3% on low volumes after the tragic weekend terrorist attack on Army headquarters. Renewed security fears were seen as a major threat to incoming FII flows and overshadowed positives on macroeconomic front with record remittances at +24%YOY in first quarter and lower trade deficit -45%YOY in 1QFY10. Furthermore, inflation numbers announced during trading hours, standing at 21 month lows beat expectation but did little to cheer mood. CPI inflation at 10.12% in September vs. 10.69% last month certainly paves way for policy rate cut in November this year with our economist eyeing at least 50bps reduction and further 100bps early next year. Investors abandoned any hope for intraday recovery after another bomb blast that rocked northern city killing over 30 people. Interestingly, none of the blue chips had an active day with most activity witnessed in holding companies and second tiers. One should also note that from today the new risk management arrangement takes effect with client level margin possibly hurting small investors capacity to trade via small brokerages. We are of the view that this new risk management measure will lead to better shock absorbing capacity in bear market but would result in hiccups as members get comfortable with netting system.