Stocks to take cue from FATF decision

Stocks are likely to stage a comeback next week as Financial Action Task Force (FATF), the global terror financing watchdog, may let a mostly compliant Pakistan off the hook amid weak economic indicators, traders said.

The market closed at 40,620 points, shedding 1,059 points, down 2.5 percent, week-on-week.

Average volumes clocked in at 166 million shares, down by 9 percent week-on-week, while the average value traded settled at $26 million, down 13 percent week-on-week.

“We expect the market to turn positive as Pakistan is fully compliant with FATF’s action plan and an announcement of status is expected in the upcoming week,” said a report by Arif Habib Ltd.

“Moreover, financial aid for flood relief from international financial institutions and friendly countries is expected soon, which should arrest the rupee free fall.”

It said stocks got off to a good start in

the outgoing week banking on Saudi Fund

for Development’s (SFD) rollover of $3 billion deposit for another year and IMF assurance of support for flood relief and reconstruction.

“However, the momentum failed to sustain as SBP foreign reserves continued to bleed, down $278 million week-on-week, which led the rupee to further depreciate against the greenback, closing at Rs239.65 towards the end of the week,” the brokerage said.

In addition to this, the FDI during 2MFY23 plummeted by 26 percent year-on-year. Furthermore, the LSM output fell 1.4 percent year-on-year and 16.5 percent month-on-month in July.

Meanwhile, the investors opted for value-buying amid expectation of receiving $1.5 billion, $0.5 billion and $0.2 billion from ADB, Asian Infrastructure Investment Bank, and the Japanese government, respectively.

Moreover, the World Bank is also expected to give flood-related support of $1.7 billion.

Foreign buying hit $5.09 million compared to a net-buy of $13.8 million last week. Major buying was witnessed in technology ($6.6 million), E&P ($0.5 million), cement ($0.5 million), and OGMCs ($0.3mn). On the local front, selling was reported in insurance ($3.3 million), followed by mutual funds ($2.4 million).

Sector-wise negative contributions came from E&P (251 points), banks (246 points), cement (123 points), power (74 points) and OMCs (73 points).

Scrip-wise negative contributors were PPL (117 points), OGDC (84 points), LUCK (83 points), MEBL (66 points) and HMB (51 points).

Sectors which contributed positively were tobacco (15 points), and automobile parts (2 points).

Meanwhile, scrip-wise positive contributions came from TRG (21pts), PAKT (15pts), UNITY (8pts), FFC (6pts), and IBFL (4pts).

Nabeel Haroon, an analyst at Topline Securities, said the decline in the index was in line with international and regional markets where multiple central banks of leading countries increased their policy rate to curb inflationary impact.

“Apart from it, political noise, where the PTI chairman has announced a fresh campaign for early election also weighed down on investor sentiment,” he added.

A KASB Research report said the

currency depreciation and the economic slowdown kept a check on the index in week. “On the positive side, the flood aid committed by the international community is expected to speed up the recovery,” the brokerage said.