KARACHI: As expected, the Pakistan stock market remained under pressure after the central bank increased the benchmark interest rate by 150 basis points against the general consensus of 100bps.
Also, the news of the current account deficit deteriorating to $1.66 billion created further volatility in the market.
“For the upcoming week, we expect the market to change the momentum to the positive side, owing to the meltdown in crude oil where Brent crude has declined 5.73 per cent so far this evening; thereby, giving a sigh of relief on the commodities front,” an analyst at AKD Securities said.
“On the flipside, the birth of a new Covid-19 variant may rise the panic across the globe.”
The Pakistan Stock Exchange KSE-100 shares index shed 5.1 per cent, or 2,375.25 points, to close at 44,114.16 points. The KSE-30 shares index lost 5.56 per cent, or 1,003.72 points, to close at 17,034.02 points.
Some recovery in participation came in with average daily trading volumes, increasing 8.2 per cent to 264 million shares. The average value of the traded securities for the outgoing week went up 13 per cent to $60 million.
A report issued by the Arif Habib Limited attributed the decline to the State Bank of Pakistan’s (SBP) increase in the policy rate by 150bps to 8.75 per cent, alarming current account deficit, which increased to $5.1 billion in the four months of FY21, beginning of the rollover week, net selling from foreigners, amid transition from the MSCI Emerging Markets to the Frontier Markets, and decline in foreign exchange reserves putting pressure on the rupee parity.
“Moreover, the announcement of a staff-level agreement with [the] IMF [International Monetary Fund] failed to rejuvenate investors’ sentiments.
Albeit, the index rebounded, amid the end of petroleum dealers’ strike post-agreement with the government to increase margins, news of Saudi inflow of $3 billion expected next week, and nosedive in the international oil prices, which might [prove to] be [a] breather for the economy.”
Other major events during the week included weekly inflation hitting seven-month high of 18.34 per cent; petrol pump dealers calling nationwide strikes and a rise in one-year Kibor to 11 per cent.
Further, Ayub Afridi resigned from the Senate, a clear indication that Adviser to the Prime Minister on Finance Shaukat Tarin is to be elevated in the Upper House of the Parliament, while the Cabinet approved Rs134 billion to the independent power producers (IPPs) as a second installment. The SBP also kept the inflation outlook unchanged at 7 per cent to 9 per cent in the medium-term.
Going forward, analysts expect the market to show positivity in the upcoming week attributable to the support from Saudi Arabia in terms of safe deposits of $3 billion in the upcoming week, which will release pressure off of foreign exchange reserves; slowdown in international oil prices, which will alleviate inflationary pressure; and an end to the rollover sessions.
However, the last date of MSCI rebalancing in November 2021 might trigger foreign selling, current macroeconomic concerns such as rising imports, higher inflationary reading due to increasing prices of commodities, and pressure on the currency could keep the market range-bound.
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