PSX under pressure over IMF talk concerns

KSE-100 index drops 977 points, or 1.5% WoW, settles at 64,816

KARACHI:

Turbulence and uncertainty marred the outgoing week at Pakistan Stock Exchange (PSX), as the market underwent a bearish spell by closing four out of five sessions in the red.

Uncertainty about securing a new, longer-term loan package in negotiations with the International Monetary Fund (IMF) kept the KSE-100 index under constant pressure.

The week kicked off on a sour note due to mounting selling pressure in selective stocks and a weak economic outlook, which kept investors at bay on Monday.

The KSE-100 index fell sharply on Tuesday, losing over 950 points with multiple factors including the weak rupee, monetary policy uncertainty, high inflation and the imminent IMF review denting investor sentiment.

The upcoming monetary policy announcement deterred investors, who otherwise had positive hopes from the IMF review under its $3 billion standby arrangement (SBA), which fuelled the bearish mood and the index dropped another 750 points on Wednesday.

The market rebounded on Thursday, soaring over 1,000 points as investor confidence returned over finance ministry’s assurance of Pakistan being in a good shape to successfully complete the SBA and secure a longer-term loan programme. However, the trend reversed in the following session when investors opted to book profits and stood on sidelines over economic concerns.

With all the gloom, the benchmark KSE-100 index lost 977 points, or 1.5% week-on-week (WoW), and settled at 64,816.

JS Research analyst Shagufta Irshad, in her report, stated that the stock market experienced high volatility throughout the week, resulting in negative close for four out of five trading days.

Read: PSX slumps on rate, IMF review uncertainty

Average traded volumes contracted 20% WoW, which depicted a reduced market activity as Ramazan began, she added.

New cabinet ministers taking charge of their offices and subsequent arrival of an IMF delegation for final review of the $3 billion SBA were the key highlights of the week.

The newly elected government remained quite firm about meeting all the structural benchmarks, quantitative and indicative targets set by the IMF. The IMF team reportedly expressed some concern about the government’s forthcoming strategies to address the anticipated revenue shortfall in 4QFY24 and reduce the circular debt in the energy sector. It is noteworthy that the review report will be submitted to the IMF executive committee by the second week of April for approval of a $1.1 billion tranche.

On the macroeconomic front, cut-off yields on Pakistan Investment Bonds (PIBs) remained unchanged compared to the previous auction, with three, five and 10-year yields standing at 16.8%, 15.5% and 14.35%, respectively. Moreover, the State Bank’s reserves remained stable at $7.9 billion, the JS analyst added.

Arif Habib Limited (AHL) wrote in its report that the stock market remained under pressure throughout the week, primarily due to divided opinions about the upcoming monetary policy, alongside negotiations with the IMF for a final SBA review.

Concurrently, the formation of the cabinet and the appointment of Muhammad Aurangzeb as finance minister put the lingering uncertainties to rest.

On the economic front, the government raised Rs93 billion against the target of Rs50 billion through the auction of Ijarah Sukuk while broad money (M2) increased Rs496 billion to Rs32.7 trillion. Additionally, the rupee appreciated slightly, closing at 278.74 against the US dollar, with WoW increase of Rs0.29, or 0.11%.

In terms of sectors, positive contribution came from automobile parts (20 points), paper and board (6 points), and chemicals (4 points). Negative contributors were fertiliser (215 points), oil and gas exploration (190 points), commercial banks (174 points), oil and gas marketing companies (103 points) and power (55 points).

Foreign investors’ buying continued during the week under review, which came in at $2.7 million compared to net buying of $6.3 million last week, AHL added.

Published in The Express Tribune, March 17^th, 2024.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.