KARACHI: Ambiguity played with investors’ sentiments at the bourse during the past week as conflicting news emerged over FATF putting Pakistan back on the terrorist financing watch list.The KSE-100 Index fell 360 points or 0.8 percent week-on-week (WoW) and closed at 43,267 points on Friday. After hitting an intraweek low of 42,919 points on Wednesday, the index gained 347 points, with major gains on Thursday owing to positive news on the FATF front (which appears to have been premature). The decline during the week was primarily concentrated in the banking sector which contributed 199pts to the overall decline. Cement and OMC sectors were next in line, contributing 50pts and 43pts respectively to the decline. Oil and Gas Exploration (E&P) companies were the largest gainers in the week, contributing 78pts to the index. Pakistan Oil Fields Limited (POL) was the single largest contributor to the index, contributing 126pts. The rise came as Pakistan Petroleum Information Services (PPIS) data showed higher than estimated reserves at Jhandial field. The stock prices reacted positively to the news despite significant reserve downgrades at Mardankhel and Makori East. According to a report by Reuters, Pakistan has been added to the terrorist financing watch list by the Financial Action Task Force (FATF). The news was a negative surprise, days after reports suggested that the anti-money laundering watchdog had given a three month extension to Pakistan. While official press release is awaited, potential addition to List may have major repercussions on sentiments but ground reality would not change much. Last time we were on it (2012-15), Pakistan managed to get an IMF bailout in 2013 and successfully tapped global bond market in 2014. Sri Lanka that was added last year did not witness any change in banking transactions with global banks and the stock market recorded net inflows. Concerns on Pakistan’s external woes continue to be reinforced; January’s Current Account deficit came in at $1.6bn, up 6.2%MoM. The deficit in 7MFY17 is up a whopping 48% despite double digit export growth. On political front, the Supreme Court ruled clear conditions under Article 62/63 for a person to be a party head (resulting in disqualification of Ex- PM Nawaz Sharif as ruling party head). This resulted in annulment of Sharif’s recent decisions, raising fears that upcoming Senate Elections might be deferred. However dust later settled on the issue as Election Commission of Pakistan allowed PML-N’s (ruling party) nominated candidates to contest Senate Elections as “Independent” candidates. Foreigners remained net sellers during the week with flows of $ 2.7 million. This takes overall outflows during February to $ 31 million, compared to $ 86 million of inflows in the preceding month. Elixir Securities’ analyst said with media reports hinting towards Pakistan’s likely inclusion on the FATF watch list, in such an event, foreign flows would drive the sentiments as locals would wait to see foreign investors’ initial reaction to the news flow. Published in Daily Times, February 25th 2018.