PSX witnesses 520-point rally as investors hopeful of favorable FATF outcome

The benchmark KSE-100 index on the Pakistan Stock Exchange (PSX) increased by more than 500 points on Friday afternoon, partly due to predictions that Pakistan will be removed from the Financial Action Task Force’s (FATF) grey list.

The PSX index rose 520.84 points from the previous day’s close of 41,730.16 to 42,251 around midnight, according to the PSX website.

According to Dawn.com’s interview with the director of Arif Habib Corporation, Ahsan Mehanti, the first session of trading ended on an optimistic note following reports of Pakistan’s impending removal from the FATF’s grey listing on agreement on compliance on 27 action items.

According to Raza Jafri, head of equities at Intermarket Securities, today’s surge is also due to “expectations of a favorable outcome” when the FATF’s four-day plenary session ends today.

” The FATF plenary session outcomes are expected later today. Today, the KSE100 is rising as investors anticipate a favorable outcome”, he remarked.

According to Salman Naqvi, head of research at Aba Ali Habib Securities, most of today’s transactions are made by financial institutions.

“Big investors have bought blue-chip shares in response to reports of Pakistan’s removal from the FATF grey list,” he added that if the country is removed from the list today, the index will cross 43,000 in the next session.

Since 2018, Pakistan has been on FATF’s heightened monitoring list, often known as the grey list, for shortcomings in its counter-terrorism financing and anti-money laundering regimes.

The FATF stated at its most recent plenary, held in Paris, that “Pakistan has fulfilled 26 of the 27 action items in its 2018 action plan.”

However, the FATF urged Pakistan to “address the one outstanding item, Namely investigating terrorism financing and targeting” senior leaders and commanders of UN-designated terrorist groups “as soon as possible.”

With the FATF’s four-day plenary conference set to end today, there has been speculation that Pakistan will be removed from the body’s grey list.

Stock Market Trend

Today’s stock market surge is a continuation of its relatively positive momentum from the previous two days, which, aside from the likelihood of Pakistan being removed from the FATF grey list, is being attributed to the recent increase in fuel prices — for the third time in 20 days.

The price increase was one of the criteria for the International Monetary Fund’s $6 billion loan program, which had been on hold since April.

Pakistan agreed to a 39-month, $6 billion Extended Fund Facility with the IMF in July 2019. However, the Fund halted disbursements of approximately $3 billion when the previous administration violated its agreements by announcing gasoline and energy subsidies.

In a late-night news conference on Wednesday, Finance Minister Miftah Ismail announced that the government was raising fuel prices by up to 29%. The prices of all petroleum products had now been brought to their purchasing price, eliminating the element of subsidy or price disparity claim.

This has been interpreted as a step toward resuming the IMF credit facility, which has improved investor confidence.

“Pakistan continues to inch closer to resuming the IMF program,” Jafri stated when asked to explain the PSX rally.

Mehndi further attributed the positive investor sentiment to speculation about the anticipated resumption of the IMF program and “institutional support on dropping government treasury bond yields.”