Stocks rebound on back of investor hopes

KARACHI:

The Pakistan Stock Exchange (PSX) bounced back and closed the two-day trading week before Eidul Azha holidays up by nearly 1,400 points as investors took fresh positions over hopes of resumption of the International Monetary Fund (IMF) loan programme.

The week commenced on a highly positive note on Monday when investors took a U-turn and returned in droves to the market. With their support, the KSE-100 index wiped out all losses of the previous week.

Optimism prevailed across the board that Pakistan-IMF talks would end successfully following Prime Minister Shehbaz Sharif’s meeting with the IMF managing director.

Furthermore, the National Assembly’s approval of a revised federal budget with additional taxes of Rs215 billion and fiscal adjustments of Rs300 billion in a bid to revive the IMF’s programme also aided the bullish close. The index gained over 1,350 points, surpassing the 41,000 mark.

The last trading session on Tuesday notched up only marginal gains following State Bank of Pakistan (SBP)’s decision to jack up its key policy rate by 100 basis points, which met another demand of the IMF for the revival of its loan programme. However, the investors mostly stayed on sidelines with the market edging up only 15.6 points.

Resultantly, the benchmark KSE-100 index surged by 1,387.37 points, or 3.46%, to settle at 41,452.69 at the end of the shortened trading week.

During Eid holidays, Pakistan reached a staff-level agreement with the IMF on a $3 billion standby arrangement, according to the lender, a decision long-awaited by Islamabad. The development is expected to give a fresh fillip to the PSX.

In fiscal year 2022-23 which ended on June 30, the PSX managed to bounce back from three-year lows and closed almost flat, instilling hope for a brighter future.

The market, which serves as a barometer for the national economy, offset losses and ended FY23 with a negligible decline of 0.20% at 41,453 points.

The impressive recovery came after a challenging previous fiscal year, during which the PSX lost 12% and reached 41,541 points.

Speaking to The Express Tribune, Arif Habib Limited (AHL) Head of Research Tahir Abbas expressed optimism, saying that the benchmark KSE-100 index “is expected to gain 20% and reach around 50,000 points in FY24.” An AHL report highlighted the significance of keeping a close watch on the upcoming events, including updates on the IMF programme, the completion of assemblies’ tenures and general elections.

A successful resumption of the IMF programme is expected to pave the way for inflows from other multilateral and bilateral partners as well as friendly countries. This could bolster Pakistan’s foreign exchange reserves and ease pressure on the external front. Additionally, experts predict that the headline CPI will start tapering off from June 2023 onwards because of a high base effect in the previous year.

 

Published in The Express Tribune, July 2^nd, 2023.

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