Weekly Review: Market may be range bound on FATF decision

KARACHI: The Stock market may be range bound next week owing to owing to decision of Financial Action Task Force (FATF) related to measures taken by Pakistan for prevention of money laundering and terror financing.

Analysts at Arif Habib Limited said that the market to be range bound next week. Pakistan may have narrowly escaped being blacklisted, but the FATF has tasked the government to address outstanding issues by Feb’20, in order to avoid being placed on the black list.

With many financial results to be announced in the coming week, the analysts expect activity to be accordingly influenced.

The benchmark KSE-100 index of Pakistan Stock Exchange (PSX) is currently trading at a PER of 5.8x (2020) compared to Asia Pac regional average of 13.3x and while offering DY of ~0.9 percent versus ~1.8 percent offered by the region.

The market commenced on a negative note this week primarily due to uncertainty over the FATF outcome from the meetings held this week.

During the week investor sentiment improved after three countries (China, Turkey and Malaysia) voted in favor of Pakistan, which eventually helped save the country from being blacklisted by FATF.

However, Pakistan still remains on grey list of FATF. Weekly return turned negative after a 2 week bull run with the KSE-100 index closing at 33,870 points, shedding 606 points (down by 1.8 percent) WoW.

Sector-wise positive contributions came from i) Fertilizers (99 points), ii) Food & Personal care products (15 points), and iii) Chemical (14 points) while negative contributions were led by i) Banks (279 points), ii) Cement (89 points) and iii) E&P Companies (78 points). Scrip-wise negative contributions were led by HBL (111 points), UBL (84 points), LUCK (65 points), HUBC (58 points) and POL (57 points).

Foreign selling continued this week clocking-in at USD 2.1 million compared to a net sell of USD 4.2 million last week. Selling was witnessed in Commercial Banks (USD 3.4 million) and Exploration & Production (USD 1.0 million).

On the domestic front, major buying was reported by Individuals (USD 8.4 million) and Banks / DFIs (USD 5.4 million). Average Volumes settled at 140 million shares (down by 51 percent WoW) while average value traded clocked-in at USD 30 million (down by 47 percent WoW).

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