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Upcoming monetary policy to set PSX tone

Upcoming monetary policy to set PSX tone

Upcoming monetary policy to set PSX tone
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KARACHI: The Pakistan stocks dropped 1.62 per cent during the week ended January 21, 2022, amid rising Covid infections and uncertainty over the upcoming monetary policy.

“Going forward, we expect the market direction to take a cue from the upcoming monetary policy announcement coupled with the IMF board meeting,” an analyst at Pearl Securities said.

The Monetary Policy Committee (MPC) of the central bank will convene on January 24.

Analysts expect the central bank to maintain status quo on the policy rate at 9.75 per cent, favouring to play a waiting game for clearer commodities trend, particularly oil, which has recently touched the multiyear highs; following geopolitical risk in the Middle East.

Additionally, the monetary policy committee could wait for the recent budgetary measures to find footing and achieve desired objective of containing the demand-side pressures, while the recent Covid-19 wave and risks to envisaged economic growth target also move the balance towards holding interest rates in the upcoming meeting.

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Hamza Kamal at AKD Securities said that the monetary policy committee maintaining status quo would likely to be a non-event for the market.

“The IMF Board is scheduled to take up Pakistan’s case for the resumption of the programme on January 28, paving the way for the disbursement of $1 billion tranche but more importantly, providing credence to the government’s macro policies for Eurobond issuance currently in the planning stage.”

“The resumption of the IMF programme is likely to be a catalyst for a strong run in the stock market. Even though recent surge in the oil prices opens up prospects for the local E&Ps, we believe individual performance would be dependent on the circular debt resolution and a surprise on the dividend payout.”

The Pakistan Stock Exchange KSE-100 shares Index shed 1.62 per cent, or 745.17 points, to close at 45,018.28 points. The KSE-30 shares Index shed 0.39 per cent, or 250.93 points, to close at 17,747.58 points.

All share average traded volume during the week decreased 43 per cent to 201 million, compared with the 356 million shares traded last week.

The market sentiment remained dull throughout the week due to higher Covid-19 pandemic cases, international oil prices hitting seven-year high to reach $89, higher coal prices and revision of GDP growth rate to 5.37 per cent for 2020/21.

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An analyst at Topline Securities noted major events during the outgoing week were the news that Pakistan might go for another IMF programme given its gross financing requirements are estimated to go up to $30 billion in the next budget for FY23.

“Among other events, Pakistan has mandated four banks as joint lead managers and joint book runners for the issuance of a seven-year tenor US dollar-denominated Sukuk.”

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