Pakistan stock market likely to rebound on IMF package

KARACHI: The Pakistan stocks adjusted 3.27 per cent during the week ended November 12, 2021, while the sentiment is hinged upon the announcement of the International Monetary Fund (IMF) package.

An analyst at AKD Securities said the market is going to watch a host of events closely where ongoing negotiations with the IMF remain paramount and an agreement there will provide the much-needed trigger for the market.

“However, political uncertainty on various fronts still remains with opposition parties threatening to stage protests across the country. Moreover, another key factor influencing the market performance is monetary policy, which is due to be announced towards the end of the month.”

The Pakistan Stock Exchange KSE-100 shares Index shed 3.27 per cent, or 1,546.65 points, to close the week at 45,749.15 points. The KSE-30 shares Index shed 3.43 per cent, or 729.68 points, to close at 17,725.86 points.

Foreign selling continued this week, clocking-in at $5.3 million, compared with a net selling of $11.2 million last week.

Average daily volumes declined 26 per cent to clock-in at 316 million shares, while the average value of traded securities slipped 29 per cent to $63 million/day.

An analyst at Arif Habib Limited said the stocks this week showed weakness, as the market participants appeared frantic, amid delay in a positive outcome from the IMF regarding resumption of the $6 billion EFF for Pakistan.

“As a result, the economic outlook appears dubious. The rupee came under immense pressure once again (down to Rs175.73/USD against Rs170.01/USD last week), as the future disbursement of foreign flows remains uncertain prior to [the] IMF tranche release, while high CPI [Consumer Price index] reading will implicate the government’s fiscal estimates.”

Amreen Soorani at JS Global Capital, said the lack of investors’ confidence was also reflected with a drop in the activity, as average volumes declined 26 per cent.

“On the other hand, [the] foreign exchange reserves of the State Bank of Pakistan (SBP) rose $126 million last week, reaching $17.33 billion and foreign investors continued to post net selling in the banking sector ($7.6 million this week).”

The MSCI’s announcement of Pakistan stocks in the MSCI FM Index (Standard) and FM Small Cap Index came by the end of the week with Systems Ltd as a surprise addition to the FM Small Cap Index.

Despite noise gaining traction on the economic front, analysts believe there is some silver lining as the first quarter of FY22 fiscal deficit declined 9.2 per cent, whereas the local production also appears under control. Therefore, the market sentiment is hinged upon the announcement of the IMF package, which is currently being stalled by two departments of the IMF. Once through, the market is likely to post a rebound.