The FATF recently expressed its satisfaction over Pakistan’s compliance on anti-terror financing and money laundering measures and Pakistan is confident that it will be taken off the FATF’s Grey List by February, but the Pakistan Stock Exchange barely reacted to the news.
“The FATF will take its time to take Pakistan off the list. Actually, it’s the Asia Pacific Group that has to clear our status and that’s not due till September,” said Intermarket Executive Director for Research Raza Jafri. “The market is not bothered by this.”
He said the corporate sector did not produce very good results in the second quarter of the 2019-2020 financial year and has performed below expected. “Reports are now coming in and the numbers aren’t very encouraging. This has the market going into a correction phase.”
With high inflation and the country’s need for inflow of cash, market talk suggests that monetary easing is not on the books. “Very unlikely that the interest rates will come down,” Jafri added. “The stock market will drop in the days to come,” he predicted.
The market has been on a negative trajectory for the past week despite rising foreign exchange reserves, higher investment and a more stable balance of payment situation.
On January 16, Pakistan saw an inflow of $536 million from the UK and USA, which was the highest in a single day. This has raised Pakistan’s collective foreign investment to $2.2 billion since the beginning of this financial year in July.
Financial analysts have different views on the heavy inflows. While some say it was the only way to support the reserves in desperate times, others suggest that this hot money will have implications on the market.