Weekly Review: Equity market likely to regain positive momentum next week on FATF hopes

KARACHI: The equity market is expected to regain the positive momentum next week after observing a lacklustre trading session during the outgoing 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.

The infection ratio of the Covid-19 pandemic has dropped to an eight-month low of 1.91 per cent, and the analysts expect the market to stay in the positive territory, going forward.

After five consecutive weeks of positive closing, the KSE-100 index finally took a breather in the week ended June 18, closing 0.13 per cent down, as investors opted to book profits in the rally that followed the announcement of the Federal Budget 2021/22.

The KSE-100 shares index shed 0.13 per cent, or 66.05 points, to close the week ended June 18, 2021 at 48,238.67 points. The KSE-30 shares index declined 0.27 per cent, or 53.08 points, to close at 19,478.73 points.

“Nonetheless, investors’ participation remained upbeat with [an] average value of traded shares improved by 5 per cent to $171 million,” Amreen Soorani at JS Global Capital said.

Technology and communication declined 0.9 per cent, fertilisers were down 1.7 per cent and automobile assemblers slipped 0.9 per cent. The higher international crude oil prices, touching $72.93/bbl, led to the oil and gas exploration companies gaining 3.4 per cent during the week.

Moreover, Pak Suzuki Motor Company (PSMC), up 2.7 per cent was one of the key performers this week, driven by tax cuts on smaller cars proposed in the Federal Budget 2021/22. K-Electric jumped 2.6 per cent was another outperformer this week over the positive developments on power supply from the federal government.

An analyst at Pearl Securities said that the market moved both ways during the week given proposed reduction in the capital gains tax (CGT) on stocks from 15 per cent to 12.5 per cent, announced in the budget FY22, 68 per cent Large Scale Manufacturing (LSM) growth in April 2021, reflecting a remarkable growth in the industrial output, and 62 per cent surge in the locally-assembled automobile sales.

“Though G-20 members agreed to suspend debt payments for Pakistan, [the] lack of clarity regarding [the] IMF [International Monetary Fund] talks triggered profit-taking at higher levels. Moreover, the IMF programme has been delayed for three months and investors were also concerned over the FATF meeting, which is due [in the] coming week.”

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

An analyst at Arif Habib Limited said the government increased dividend expectations from the Oil and Gas Development Company (OGDC) and Pakistan Petroleum Limited (PPL), which kept these scrips in the limelight. “However, the market turned red later in the week, as the investors resorted to profit-taking.”

Foreign selling continued this week, clocking-in at $6.8 million, compared with a net buying of $7.5 million last week. Selling was witnessed in commercial banks ($2.5 million) and technology ($2.5 million). On the domestic front, the major buying was reported by individuals ($21.4 million) and the mutual funds ($10.9 million). Average daily volumes arrived at 1,049 million shares/day, down 3 per cent on a weekly basis.