Stocks to take cue from amnesty scheme success

Stocks suffered setbacks as investors remained on economic tenterhooks through the week, whereas all eyes are likely to be on the outcome of amnesty scheme, news on foreign exchange inflows under it, and a possible extension of deadline, dealers said on Saturday.

Hamad Aslam, director research at Elixir Securities, said the reports on amnesty scheme would continue to be the most important sentiment driver over the next week.

“In case the scheme manages to translate into sizeable foreign repatriations in excess of $2 billion, it will serve as a breather for the balance of payment and strained foreign reserves,” Aslam said.

He further said any extension in the deadline (currently set at June 30, 2018) would also be taken positively for the market.

BMA Capital Management Limited in a report said ongoing amnesty scheme remained the talk of the town and according to unconfirmed news reports, Rs75 billion worth of taxes have been collected with another Rs75 billion plus in the pipeline.

“The success of the scheme will improve domestic liquidity, but its impact on the balance of payment may be limited as we expect foreign repatriations to be on the lower side,” the brokerage said.

The Financial Action Task Force’s (FATF) decision to put Pakistan on their grey list kept the market buzzing and volatility reigned supreme. On the first day of the week the benchmark KSE-100 index lost more than 600 points but late-week recovery helped the bourse gain 274 points or 0.7 percent, closing at 41,911 points, after touching an intra-week low of 40,901.

On the other hand, the FATF’s decision also triggered foreign selling, where as in the local market, mutual funds followed the foreign investors’ suit.

An analyst from Habib Metro Financial Services said the bourse was currently experiencing volatility due to high political uncertainty surrounding the upcoming general elections and the economic environment of the country. The analyst was of the view that there was renewed interest in the steel sector after the government unveiled a draft policy for steel sector development.

“Under the policy, green-field investments of at least $350 million would receive several incentives,” the analyst said.

He added that this allowed the sector to close 3.45 percent higher during the outgoing week. “International Steels went online with their cold rolled steel expansion, gaining 6.18 percent during the week,” the analyst added.

The government’s decision to raise margins for petrol and high speed diesel sales by Rs0.09/litre and Rs0.23/litre respectively allowed oil marketing companies to close 1.84 percent higher on week on week basis. This decision affected HASCOL the most, which stands to gain the most out of this change, closing 9.3 percent higher during the outgoing week.

Foreign investors sold shares worth $15.5 million during the week. On the domestic front, Mutual Funds and Brokers offloaded shares worth $8.4 million and $8.3 million, respectively. On the other hand, insurance companies and banks stood out as net buyers of equities worth $22.9 million and $6.5 million, respectively.