KSE-100 plunges after bull-run for two weeks

Investors wary due to FATF review, uncertainty on domestic front

KARACHI: The euphoria of the past two weeks fizzled out at the stock market in the outgoing week as investors were wary of the outcome of Financial Action Task Force (FATF) meeting on Pakistan, dragging the index down by 606 points or 1.8% at 33,870 points.

Equities kicked off the week on a bearish note as investors awaited the FATF review, which kept trading activity subdued. The situation on the domestic front was not encouraging either as the opposition political parties geared up for the Azadi March on October 31, causing selling pressure at the bourse.

The market’s journey to the south continued as the benchmark index dipped further in the following session on the back of profit-taking. The selling pressure came in the wake of a decline in global crude prices and concern over weak corporate earnings.

However, the trend changed on Wednesday when the index gained following speculation of a positive outcome for Pakistan from the FATF meeting. A news report also emerged that said the global body would keep Pakistan in the grey list for the next four months. However, no official statement was issued by then by the FATF.

The much-awaited FATF decision was announced on Friday afternoon, in which the Paris-based body decided to keep Pakistan on the grey list, effectively providing the country another four months to complete remaining actions as it had not fully implemented the 27-point action plan.

On the international front, Prime Minister Imran Khan was seen mediating between Saudi Arabia and Iran because tensions had spiked in the region following attacks on oil facilities in the Gulf. Moreover, the US-China trade war also seemed to have cooled off with an initial deal between the two countries.

The remaining two sessions saw the index retreat into the red zone as investors braced for the FATF verdict and weak political cues dented sentiment.

Activity on the bourse remained subdued as average daily traded volumes declined 51% week-on-week to 140 million shares while average daily traded value shrank 47% to $30 million.

In terms of sectors, positive contribution came from the fertiliser sector (up 99 points), food and personal care products (15 points) and chemical firms (14 points). Negative contribution was led by banks (down 279 points), cement companies (89 points) and exploration and production firms (78 points).

Stock-wise, negative contribution came from HBL (down 111 points), UBL (84 points), Lucky Cement (65 points), Hubco (58 points) and Pakistan Oilfields (57 points). Foreign selling continued during the week which came in at $2.1 million compared to net selling of $4.2 million last week.

Selling was witnessed in commercial banks ($3.4 million) and exploration and production firms ($1 million). On the domestic front, major buying was reported by individuals ($8.4 million) and banks/DFIs ($5.4 million). Among major news of the week were Ogra and Finance Division suggesting rationalisation of oil margins, foreign exchange reserves held by SBP standing at $7.8 billion and discovery of hydrocarbon reserves in Kohat.

Published in The Express Tribune, October 20^th, 2019.

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