Market trend-Equities likely to remain volatile

KARACHI: The Pakistan bourse is likely to remain volatile and under pressure next week, as the country’s political and economic atmosphere worsened, analysts said.

An analyst at Pearl Securities said the market was subjected to significant downward pressure during the outgoing week, amid uncertainty pertaining to the political turmoil and a deal with the International Monetary Fund (IMF), as the week ended by losing 1,632 points to close at 39,669.

“The bourse observed a bloodbath on December 21, as the market penetrated through previous support levels towards lower lows and lower highs, while losing 1,959 points, or 4.7 per cent, between December 19 and 21 and closing at a 26-month low level of 39,343 points,” he added.

Most of these losses were attributed to a vote of no-confidence against Punjab’s chief minister, Tehreek-e-Insaf’s (PTI) announcement to dissolve the provincial assemblies, friction over power sector debt between the IMF and the government and the downgrading of Pakistan’s credit ratings, he remarked.

The political instability remained a major concern for the investors, as the PTI announced to dissolve the Punjab assembly on December 23.

To counter such measures, the Punjab governor de-notified the chief minister, while the coalition parties moved to submit a vote of no-confidence against the Punjab speaker and deputy speaker.

In another blow to the investors’ confidence, the global ratings agency, S&P Global on December 22 downgraded Pakistan’s long-term sovereign credit rating by one notch to “CCC+” from ‘B’ to reflect a continued weakening of the country’s external, fiscal and economic metrics.

Pakistan’s already low foreign exchange reserves will remain under pressure through 2023 unless oil prices slump or foreign assistance improves, the agency said.

An analyst at Topline Securities said the KSE-100 Index continued its downward trajectory, as it declined four per cent on a weekly basis, attributed to muted progress on the IMF programme, amid narrowing foreign exchange reserves.

“The equity market remained under pressure, owing to the announcement of the energy conservation plan by the government, signifying the gravity of the current economic situation and increased political noise, where the Pakistan Democratic Movement (PDM) and PTI are at loggerheads over the dissolution of the Punjab Assembly,” he added.

The investors continued to remain on the sidelines, as the average daily traded volume stood at 180 million shares during the outgoing week, while the average daily traded value clocked-in at Rs4.9 billion, he remarked.

Pakistan’s negotiations with the IMF remained stalled, further increasing the pressure on the economy, as the country is facing a balance of payments crisis due to narrowing foreign exchange reserves.

The foreign currency reserves held by the State Bank of Pakistan (SBP) dropped $584 million to reach $6.1 billion during the week ended December 16, compared with $6.7 billion on December 9.

The forex reserves went down to the levels worth just eight weeks of imports, their lowest since April 2014.

The overall liquid foreign currency reserves held by the country, including the net forex reserves held by the commercial banks stood at $12 billion. The net foreign exchange reserves held by the commercial banks amounted to $5.88 billion.