Positive triggers likely to keep bourse bullish

KARACHI: The Pakistan’s equity market gained 1.68 per cent during the week ended January 7, 2022, amid rising global commodity prices and likely release of the International Monetary Fund (IMF) tranche, dealers said.

The market outlook is guided by expected improvement on the external front through available financing from multilateral sources with the International Monetary Fund (IMF) as the key anchor.

Farhan Mehmood, Head of Research at Sherman Securities, said that the concerns on the external account would fade away once the IMF-led Extended Fund Facility (EFF) programme was revived in February.

As per the official figures shared by the State Bank of Pakistan (SBP), additional funds of $17 billion are likely to be unlocked during the second half of FY22 once the IMF Board gives a go-ahead.

“As far as the economic growth is concerned, we believe GDP in FY22 will fare better than FY21 growth and the 10-year average. Our FY21 GDP growth expectation is 5 per cent. However, other macroeconomic indicators are not in line with their 10-year historical averages.”

“Similar to the previous boom and bust cycles, there were concerns about the State Bank of Pakistan’s (SBP) foreign exchange reserves but after accounting for expected inflows during the second half of FY22, we believe the central bank will have adequate reserves to meet [the] gross external financing needs (current account and amortisation) during FY22. However, these inflows hinge upon a successful IMF review due in February.”

Analysts believe in the worse scenario, a delay in the IMF programme and higher commodity prices would affect the foreign exchange reserves and eventually decrease the import cover by a month, which may trigger depreciation in the rupee value.

The KSE-100 Index ended the week with the gains of 1.68 per cent, or 750 points, to close at 45,346 points level.

However, all-share average traded volume during the week increased massively by 46 per cent, compared to the last week.

An analyst at Pearl Securities said the market took direction from 13 per cent decline in imports, the Consumer Price Index (CPI) inflation at 12.3 per cent in December and amendments made to the finance bills led to resumption of the IMF programme.

“Coal prices increased, amid Indonesia banned the export of coal to avoid power outages, while trade deficit widened 106 per cent, reaching $25.5 billion in 1HFY22 [first half of FY22].”

“Going forward, we expect the market to move high post approval of the mini-budget from the Parliament. Therefore, we recommend our investors to adopt the “Buy on Dip” strategy in the upcoming week.”

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