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Wednesday February 08, 2023

Stocks to celebrate exit from grey list

October 23, 2022

Pakistan stocks increased during the outgoing week, while positivity would likely prevail next week as well on account of the country’s removal from the Financial Action Task Force (FATF) grey list.

However, the positive sentiments would also remain in check due to the tensions on the political front, brought on by the election commission’s decision to disqualify former prime minister Imran Khan.

“The market is expected to remain positive in the upcoming week as the participants will celebrate the removal of Pakistan from FATF’s grey list,” said a report by Arif Habib Ltd. “Furthermore, in case of materialisation of inflows of $1.5 billion from ADB, the market will respond positively. However, the political noise will keep the market in check,” the report said.

KASB Pakistan Research in its weekly report said current account deficit (CAD) numbers were favourable due to import restrictions, but investors believed it was not sustainable. While on the commodity front, crude oil declined 2.1 percent WoW amidst the US selling off its reserves and lower demand from China.

The finance minister remains positive about procuring cheaper oil from Russia after his visit to the US. “All this could instil a positive momentum amongst investors once the political situation stabilises,” it reported. “We expect the cyclical – cement and steel – and refineries to keep a positive momentum going forward.”

Arif Habib Ltd said the market commenced on a negative note this week amid uncertainty on the political front. Furthermore, the rupee remained under pressure against the greenback, closing at 220.84 (down by Rs2.411 percent WoW). Also SBP reserves were stable at $7.6 billion this week.

In addition to this, Pakistan’s foreign direct investment declined by 47 percent YoY during the first quarter of FY23. The momentum shifted towards the green zone since the current account deficit narrowed by 72.5 percent YoY to $316 million during September 2022 (lowest since April 2021).

A statement from the US showing confidence in Pakistan’s nuclear programme strengthened the sentiment. Moreover, a loan worth $1.5 billion from ADB was finalised during the outgoing week, which kept the momentum strong.

The market gained 0.63 points WoW or 265 points to close at 42,213 points level. Average volumes clocked in at 228 million shares (down 14 percent WoW) while the average value traded settled at $28 million (down 35 percent WoW).

Foreign selling was also witnessed during this week, clocking in at $3.4 million compared to a net buy of $12.3 million last week. Major selling was witnessed in commercial banks ($1.9 million), technology ($1.1 million) and all other sectors ($0.9 million).

On the local front, buying was reported by individuals ($5.4 million) followed by broker proprietary trading ($0.9 million).

Sector-wise positive contributions came from fertilisers (112 points), power (82 points), E&Ps (49 points), banks (37 points) and tobacco (31 points). Scrip-wise positive contributors were Hubco (80 points), Engro (77 points), Mari Petroleum (51 points), Pakistan Oilfields (44 points) and Millat Tractors (40 points).

Sectors which contributed negatively were technology (40 points) and chemical (28 points). Scrip-wise negative contributions came from Pakistan Petroleum (31 points), Pakistan State Oil (26 points), Systems Limited (19 points), TRG (18 points) and Engro Polymer (16 points).

Nabeel Haroon at Topline Securities said the gain in the index can be attributed to the current account deficit, down 73 percent YoY and 53 percent MoM to $316 million in September 2022 and the expectation that Pakistan might be removed from the FATF grey list, which was later moved to the white list on the last day of the week.

Under other major news of the week, government raised Rs853 billion via T-bill auction and Q1 textile group exports witnessed 3.68 percent growth YoY.

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