Stocks lose as ‘grey list’ talks win the game

Stocks turned losses moving in all directions as apprehensions arising from Pakistan’s possible return to terrorist financing watchlist and political repercussions following a former premier’s disqualification as ruling party head kept investors on edge during the week, dealers said.

Syed Atif Zafar at JS Global Capital said during the week ambiguity over conflicting news about Financial Action task Force’s (FATF) putting Pakistan back on terror funding countries list, defined the sentiments at the bourse.

“On the domestic political front as well, uncertainty hovered over the Senate elections as Supreme Court declared Nawaz Sharif ineligible to head PML-N, and subsequently Election Commission decided to treat PML-N nominees for the Senate elections as independent candidates,” Zafar said. The KSE-100 shares index shed 0.82 percent or 359.9 points to close the week at 43,267.20 points, while KSE-30 shares index shed 0.53 percent or 116.15 points to end at 21,734.43 points. The outgoing week witnessed a decline of 7.5 percent in average daily turnover. Being net sellers, foreigners sold shares worth $2.8 million during the week against $16 million worth of equities offloaded last week. On the local front, insurance companies turned out to be the net-buyers of shares worth $14.5 million, whereas individuals became net-sellers by shedding securities worth $11.2 million.

An analyst at Topline Securities said equities remained volatile as investors were busy conjecturing whether Pakistan would be included in FATF's watchlist - the biggest question currently facing the market. “Though market was rife with speculation that Pakistan will be placed on the grey list from June 2018, there was no official announcement on this matter in the outcomes of FATF plenary meeting concluded Friday in Paris,” the analyst said.

The week also did not fare any better in terms of macroeconomics as recently released numbers continued to reflect cracks in the external account. The current account deficit for January 2018 clocked in at $1.62 billion, up 27 percent from $1.3 billion in December 2017. As a result, the country continues to bleed foreign exchange reserves, which further declined by $139 million during the week to $18.83 billion, lowest since November 2017, in spite of Pakistan procuring additional $533 million commercial loans from foreign banks in January 2018. Textile exports made headlines during the week by exhibiting a 7.0 percent growth on the back of incentive package coupled with USD/PKR depreciation. Moreover, Amreli Steel announced an expansion of rebar plant, but scaled down its target from 145,000 tons to 95,000 tons.

Also, after a three-month ban the government ordered Pakistan State Oil (PSO) to arrange import of 180,000 tons of furnace oil to replenish declining inventories available with the power sector.

Furthermore, government allowed Ghandhara Nissan to go ahead with their brownfield expansion to import auto parts at lower rates for a period of three years.

Analysts see pressure mounting on equities and rupee as FATF’s decision didn’t come exactly in favour of Pakistan, opening up exodus of foreign portfolio investment, while investors would also track political environment.