Stocks to track ‘grey list’ decision

After five straight stellar weeks, stocks corrected in the outgoing week on profit-taking, but are likely to rebound after Financial Action Task Force’s (FATF) decision on Pakistan's 'grey list' status next week, dealers said.

The KSE-100 shares index shed 0.13 percent or 66.05 points to close the week ended June 18, 2021 at 48,238.67 points.

Amreen Soorani at JS Global Capital said nonetheless, investor participation remained upbeat with average value of traded shares improving by 5.0 percent to $171 million. KSE-30 Shares Index declined 0.27 percent or 53.08 points to close at 19,478.73 points.

Technology & communication declined 0.9 percent, fertilisers 1.7 percent and automobile assemblers slipped 0.9 percent.

On the other hand, higher international crude oil prices (touching $72.93/bbl) led to the oil & gas exploration companies gaining 3.4 percent during the week.

Moreover, Pak Suzuki Motor Company, up 2.7 percent, was one of the key performers this week, driven by tax cuts on smaller cars proposed in the Federal Budget FY22.

K-Electric jumped 2.6 percent was another outperformer this week over positive developments on power supply from the federal government.

An analyst at Pearl Securities said the market moved both ways during the week given proposed reduction of Capital Gains Tax (CGT) on stocks from 15 percent to 12.5 percent announced in the budget FY22, 68 percent growth in large-scale manufacturing during April 2021 reflecting a remarkable improvement in industrial output, and 62 percent surge in locally assembled automobile sales.

The G-20 members agreed to suspend debt payments for Pakistan, and lack of clarity regarding IMF (International Monetary Fund) talks triggered profit-taking at higher levels, the analyst said.

Moreover, the IMF programme has been delayed for three months and investors were also concerned over FATF meeting, due next week.

Economic Coordination Committee has decided to defer the payments of Independent Power Producers (IPPs), which further dented the market sentiment.

An analyst at Arif Habib Limited said the government increased dividend expectation from Oil and Gas Development Company and Pakistan Petroleum Limited, which kept these scrips in the limelight.

However, the market turned red later in the week as the investors resorted to profit-taking, the brokerage said.

Foreign selling continued this week, clocking in at $6.8 million compared to a net buy of $7.5 million last week.

Selling was witnessed in commercial banks ($2.5 million) and technology ($2.5 million). On the domestic front, major buying was reported by individuals ($21.4 million) and mutual funds ($10.9 million).

Average daily volumes reached 1.049 billion shares a day, down 3.0 percent week-on-week.

Having observed a lackluster outgoing week, stocks are expected to regain positive momentum in the coming week.

“With FATF’s Plenary Session to be held on June 21st, the index is expected to bounce back as an exit from the grey list seems imminent,” an analyst at Arif Habib Limited said.

Furthermore, Covid-19 infection ratio has dropped to 8-month low of 1.91 percent, and the pundits expect the market to stay in a positive territory going forward.