KARACHI: After shedding 362 points (-0.8 per cent) during the last week amid the Financial Action Task Force (FATF) plenary session, the Pakistan Stock Exchange (PSX) is likely to remain in green this week as clouds of FATF-led uncertainty have dispersed.
Moreover, a ceasefire at the Line of Control (LOC) agreed upon between the director generals military operations (DGsMO) of Pakistan and India may further boost investors’ sentiments.
Against the falling gold prices, the stability of the Pakistani rupee against the US dollar and increasing prices of crude futures may keep the market green this week.
Gold price in the international market plunged and it was closed at $1,735.60 an ounce on Friday last after shedding $35.50 an ounce in its value as compared to its value on Thursday last.
International ratings agency Fitch has predicted the price of gold will fall to $1,600 per ounce this year and slide further down to $1,400 in 2022 “on increased demand due to investment flows and central bank purchases.”
The Pakistani rupee appreciated by Rs1 against the US dollar during the week. The local currency made gains against the greenback during all five days.
On the other hand, oil prices are trading at a 14-month high as the US West Texas Intermediate (WTI) crude futures were closed at $61.50 a barrel, Brent at $64.42, the price for Opec Basket was recorded at $65.42, and closing price of Arab Light remained $65.14.
According to the latest outlook by Morgan Stanley, prices for Brent crude will reach $70 per barrel in the third quarter on “signs of a much-improved market.” At the same time, Goldman Sachs Commodities Research says that prices will climb to $70 per barrel in the second quarter from the $60 it previously predicted, and $75 in the third quarter from $65 earlier.
The benchmark KSE-100 Index closed at 45,865.02 points last week against its closure at 46,227.65 points on the preceding week. Among other indices, the KSE All Share Index closed at 31,436.15 points against its closure at 31,851.18 points on a week-on-week (WoW) basis. Likewise, the All-Share Islamic Index closed at 22,806.72 points against 23,041.25 points on a WoW basis.
Analysts at Arif Habib Limited said that the market to remain positive in the upcoming weeks as clouds of FATF-led uncertainty have dispersed and with only 3 action plans to be addressed, the likelihood of Pakistan exiting the grey list in June 2021 is very bright.
Moreover, a ceasefire across the LoC with India is a massive feat on the political front and will further aid stability in the regional climate.
The benchmark KSE-100 index of the Pakistan Stock Exchange is currently trading at a PER of 7.2x (2021) compared to the Asia Pacific regional average of 17.1x and while offering a DY of ~6.8 per cent versus ~2.5 per cent offered by the region.
The index remained under pressure this week in anticipation of FATF’s plenary meeting (scheduled February 22 to 25, 2021), whereby Pakistan retained its status in the greylist and has until June 2021 to meet 3 of the 27 initial action points. Albeit, a relief rally was witnessed on Thursday as valuations opened up and a robust dividend announcement from UBL lured bulls.
Moreover, another current account deficit (CAD) was posted in January 2021 at $229 million in January 2021 versus $652 million in December 2020 while FDI for 7MFY21 underwent a 27 percent dip YoY to USD 1.145 billion compared to USD 1.577 billion in SPLY.
Sector-wise negative contributions came from oil & gas exploration companies (107 points), commercial banks (105 points), and oil & gas marketing companies (78 points). Whereas sectors that contributed positively include cement (119 points), technology (53 points), and textile weaving (7 points). Scrip-wise negative contributors were OGDC (92 points), PSO (42 points) and NBP (41 points) while positive contributors included LUCK (160 points), TRG (56 points) and MEBL (28 points).
Foreign buying this week clocking-in at $0.3 million compared to a net sell of $0.6 million last week. Buying was witnessed in cement ($2.6 million) and technology and communication ($2.2 million). On the domestic front, major selling was reported by Broker Proprietary Trading ($10.7 million) and Mutual Fund ($4.9 million). Average volumes arrived at 589 million shares (down by 1 per cent WoW) while the average value traded settled at $159 million (up by 0.01 per cent WoW).
FBR SURPASSES 8-MONTH REVENUE COLLECTION TARGET:
In other financially positive news about the economy, the Federal Board of Revenue (FBR) surpassed the revenue collection target for the first eight months (July-February) of the current financial year 2020-21 by Rs18 billion.
The FBR has released the provisional revenue collection figures for the first eight months of the current fiscal year. According to the provisional information, FBR has collected net revenue of Rs2,916 billion during July-Feb period, which has exceeded the target of Rs2,898 billion. This represents a growth of about 6 per cent over the collection of Rs2,750 billion during the same period of the last year.
The net collection for the month of February was Rs343 billion against a required target of Rs325 billion, representing an increase of 8 per cent over last February and 106 per cent of the target. When finalised after book adjustments, the collection figures are likely to improve further.
On the other hand, the gross collections increased from Rs2,823 billion during this period last year to Rs3,068 billion, showing an increase of nearly 9 per cent. The number of refunds disbursed was Rs152 billion compared to Rs79 billion paid last year, showing an increase of 97 per cent. This is reflective of FBR’s resolve to fast-track refunds to prevent liquidity shortages in the industry.
The improved revenue performance is a reflection of growing economic activities in the country despite facing the continued challenge of the second wave of Covid-19. During March-June 2021, it is expected that this revenue performance would be improved substantially compared to 2020 when economic activities were disrupted.
Meanwhile, FBR’s efforts to broaden the tax base are picking up pace. Early signs suggest such efforts are bearing fruits. On 28-2-2021, income tax returns for the tax year 2020 have reached 2.62 million compared to 2.43 million last year, showing an increase of 8 per cent. The tax deposited with returns was Rs49.6 billion compared to only Rs31.0 billion, showing an increase of 60 per cent.
It may be recalled that last year the final date for submission to returns was February 28. FBR’s decision to adhere to 8th December as the last date has been vindicated as more returns and higher tax payments have been recorded during the tax year 2020 compared to 2019.
Moreover, the FBR has issued notices to nearly 2.1 million taxpayers who were supposed to file returns, or have filed a nil return, or mis-declared their assets or have not been filing returns for sales tax to comply with their legal obligations.
The exercise is eliciting encouraging responses. However, those who are not complying would be pursued diligently until compliance is achieved.
The FBR has also released information about Tier-I retailers who have been integrated with the POS system. According to the information, 9952 sales points have been integrated with the Point of Sales (PoS) Linked Invoicing System.
Pakistan Customs has initiated a focused counter-smuggling drive. In February 2021, smuggled goods worth Rs. 4.08 billion have been seized while in February 2020; smuggled goods worth Rs. 3.02 billion were seized, thus showing a monthly increase of 35.18 per cent.
Similarly, during the last 8 months (July 2020-Feb 2021) of the current financial year smuggled goods worth Rs39.52 billion have been seized as compared to Rs25.10 billion from July 2019 to February 2020 of the last financial year thus showing an increase of 57.45 per cent.
Moreover, the value of seized goods of Rs39. 52 billion in 8 months of current FY has crossed the total value of seized goods of last year. In FY 2019-20, smuggled goods worth Rs36 billion were seized.
