KSE-100 continued its fall as Pakistan remained on the Financial Action Task Force’s (FATF) grey list. Pakistan has completed 26 of the 27 action items but still missed out on being removed from FATF monitoring. Additionally, the Morgan Stanley Capital International (MSCI) announced that Pakistan’s emerging market status will be reviewed since it no longer meets the standards for size and liquidity. While some market commentators rejoiced at this news, anticipating higher foreign inflows as a Frontier market, the reclassification is a downgrade. It highlights the weakness in Pakistani capital markets as no companies meet the requirements anymore, with Lucky Cement, MCB and HBL included just for continuity purposes. The exchange rate depreciated by more than 1% before recovering at the end of the week. Local gold prices fell this week, in line with the international sell-off last week. However, with US inflation coming in lower than anticipated, international gold prices are up again. This could lead to a recovery in local gold prices too.
The annual change in Sensitive Price Index is up to 15.29% vs. 14.52% last week. This means inflation is back up above 15% level after falling last week. On a weekly basis, prices rose significantly by 0.82%. While the weekly increase was the highest for the richest in the country, the poorest continue to experience the highest burden of inflation. Chicken prices (+11.43%) continued to rise along with Tomatoes (+14.56%) and Onions (+8.38%), leading to rising food inflation. Minor drops in the prices of Daal Masoor (-0.26%) and Sugar (-0.12%) failed to control inflation. The bureau has launched a city wise monitoring report, which could be helpful in improving governance in the coming week.
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