LAHORE - The Pakistan Stock Exchange made a minor recovery during the week despite FATF’s move of placing Pakistan on grey list, with the KSE 100-index edging up 274 points (0.7 percent WoW) to close at 41,911 points, nevertheless an improvement from the preceding week (down 4.7 percent).

Although the stock market kicked off on a bearish note (possibly due to news flows relating to increase in gas prices), down 659 points at the end of the first trading session (the index cumulatively shed 6.2 percent during the last four trading sessions), the next three days saw the market jump 1,020 points (up 2.5 percent), which was likely due to (1) attractive valuations perceived by investors following massive correction, (2) Positive news flows on ongoing amnesty scheme, and (3) fiscal year-end factor.

Market participation also witnessed an increase, as volumes rose by 6.8 percent WoW to reach an average of 182m per day, while average daily value traded moved south slightly by 1.4 percent WoW to $60m. Oil marketing companies (OMCs) put up a strong performance, up 1.8 percent WoW, on news of the government notifying increase in profit margins of the sector by up to ten percent from July 1, 2018. Cements (up 0.7 percent WoW) also enjoyed a bullish run, which was likely due to news flow regarding pressure from the apex court to construct dams in Pakistan. Additional burden was probably caused due to Pakistan's placement on the FATF grey list, which would create additional scrutinization of the country's international trade.

Experts said that this week marked the end of market trading activity in FY18 whereby the market has delivered first negative return of 10 percent since FY09. This week’s proceeding started on a weak note with negative momentum from last week extended in the initial trading sessions. The much-awaited decision by Financial Action Task Force was finally unveiled with Pakistan’s name placed in FATF’s grey list for about 15 months. However, this failed to dent sentiments at the local bourse as Pakistan’s grey listing was largely expected and as a result, the market rose +0.7 percent. On the int’l front, OPEC members decided to raise oil output by 1m bbl/day in order to avoid a supply shortage which was lower than the initial guideline. As a result, the oil & gas sector ended the week up 0.7 percent WoW. Among top performers during the week included industrial metals & mining (+3.9 percent WoW), engineering (+2.3 percent WoW) and electricity (+1.8 percent WoW). Market activity rose during the week amidst increased focus towards 2nd tier and 3rd tier scrips as ADT expanded 7 percent WoW while ADTV contracted 1 percent WoW.

Amongst specific scrips, ISL ended the week up 3.9 percent WoW as the company announced commencement of commercial operations of its new cold rolling mill. In addition, Lucky Electric Power Company, a wholly owned subsidiary of LUCK, announced financial close of its $885m, 660MW coal fired power at Port Qasim. LUCK ended the week up a marginal 1.5 percent WoW as concerns over energy prices likely overshadowed investor sentiment. On the macro front, SBP’s foreign exchange reserves fell by $602m to end the week at 9.7b, whereas, total foreign exchange reserves of the country stood at 16.2b.

Foreign investors remained net sellers in all sectors and net sold equities worth $15.5m during the week. Most of the selling was witnessed in banks (8.6m), cement (2.0m) and oil & gas (1.6m) sectors.

Over the coming week, investors will likely focus on outcome of amnesty scheme, news flow on foreign exchange inflows under it and possible extension of the scheme in case of less than encouraging response. Going forward, the market is likely to remain lackluster as investors eye the upcoming general elections and possible political set up post elections. Experts highlighted MCB, PPL, HUBC, NCL and EFERT as top picks and advised investors to view weakness in these scrips as a good entry point.