Next week to bode well for PSX

KARACHI: The Pakistan bourse gained 1.8 per cent for the week ended January 4, 2022, as investors took positions on financial results speculations and strong rupee recovery; following the approval of $1 billion tranche by the International Monetary Fund (IMF), dealers said, adding that the market would perform well, going forward.

The Pakistan Stock Exchange KSE-100 shares Index shed 1.8 per cent, or 831.74 points, to close at 45,909.65 points. The KSE-30 shares index shed 0.98 per cent, or 175.91 points, to close at 17,968.9 points.

Pakistan’s external funding has exerted considerable pressure on the country’s foreign exchange reserves. Since the peaks of $20 billion witnessed back in August 2021, The State Bank of Pakistan’s foreign exchange reserves have declined 19 per cent to the current levels of $16.2 billion as of January 2022.

An analyst at KASB Securities said the resumption of the IMF programme opens several avenues for Pakistan to raise funding on the international forum.

“Apart from the $1 billion raised from floating Sukuks, the government has also announced intentions to float ESG bonds of a similar amount. Moreover, the government had earlier announced intentions to launch Panda bonds and Green bonds to bridge its external financing needs,” he said.

Additionally, Prime Minister Imran Khan is scheduled to reach China to discuss CPEC-based projects and Special Economic Zones (SEZs). Notably, media reports earlier highlighted that Pakistan could request an additional $3 billion as SAFE deposits to further shore up its foreign exchange reserves balance. Further, the recent policy steps taken by the federal government and the central bank have started showing their effects as early signs of an economic slowdown are apparent.

“We recommend building positions in sectors relatively insulated from macroeconomic headwinds, including textiles and technology. As the IMF continues to reiterate the need for addressing the circular debt issue via the circular debt management programme (CDMP), we also prefer energy chain stocks,” the KASB Securities analyst said.

Farhan Mahmood at Sherman Securities said that the KSE-100 would witness a relief rally, as this may bring stability to the rupee-dollar parity and subside concerns on external accounts for the time being.

“Historically, we have seen the market volatility in the months preceding the IMF approval but improves by an average 9 per cent after the programme begins. We believe foreigners, who were awaiting successful completion of the IMF’s review, will re-enter the Pakistani market, especially in oil, energy, cement and banking sectors, currently trading at a discount of 70 per cent from other Asian frontier markets.