Stocks lose over one percent as IMF loan remains elusive

Stocks on Thursday succumbed to a lingering dealock in Pakistan’s negotiations with International Monetary Fund (IMF) for a loan to dodge a balance of payments crisis, setting off a fresh selling spree in almost all the sectors, amid reemerging macroeconomic concerns, dealers said.

Analyst Ahsan Mehanti from Arif Habib Corporations said stocks closed bearish on investor concerns for economic uncertainty. “Global equity selloff, no immediate affirmations on financial assistance from UAE, China, and reports of deadlock over IMF’s tougher conditions amid extension of IMF bailout talks impacted sentiments,” Mehanti said. He added that uncertainty over State Bank of Pakistan’s (SBP) policy rate stance next week, foreign outflows and concerns for surging circular debt led to the bearish close. Pakistan Stock Exchange’s (PSX) benchmark KSE-100 shares index lost 1.32 percent or 545.21 points to close at 40,874.03 points level. KSE-30 shares index followed suit with a loss of 1.82 percent or 361.29 points to end at 19,467.95 points level.

Of 362 active scrips, 78 moved up, 268 retreated, and 16 remained unchanged. The ready market volumes stood at 160.197 billion shares, as compared with the turnover of 167.325 billion shares in the previous session. Murtaza Jaffar of Elixir Securities said selling pressure was witnessed particularly high in exploration and production stocks owing to falling international crude oil prices and collectively contributed to a loss of 209 points in Thursday session. United Bank Limited fell 2.35 percent after it announced it was ready to voluntarily liquidate and surrender its banking license to New York Banking Laws after carefully reviewing the viability of its branch operations, subject to all regulatory approvals, Murtaza added.

A leading analyst said the government has refused to accept those tough IMF demands as it would accelerate pace of inflation and slow down the economic pace.

An analyst said the government might have refused the conditions attached to the loan because of financial assistance to be received from the brotherly countries like Saudi Arabia and China.

Saudi Arabia has already deposited $1 billion to help shore up the foreign exchange reserves.

The market movers believe that assistance alone cannot help improve foreign debt payment obligations.

The chronic problem for the economy has been the circular debt which has widened the fiscal deficit and also non-availability of payments to put on risk the companies associated with energy and power sectors. Auto sector was on the losing side because analysts expect the interest rate to go up, which would further trim the consumer financing size and erase profits of the companies.

The highest gainers were Murree Brewery, up Rs26.83 to close at Rs782.83/share, and National Refinery, up Rs14.67 to finish at Rs308.26/share. Companies that booked highest losses were Colgate Palmolive, down Rs126.49 to close at Rs2403.49/share, and Rafhan Maize, down Rs100.00 to close at Rs7100.00/share. Engro Polymer recorded the highest volumes with a turnover of 10.971 million shares. The scrip gained Rs0.07 to close at Rs40.41 / share.

The lowest volumes were witnessed in Lotte Chemical, recording a turnover of 17.138 million shares, and losing Rs0.42 to end at Rs19.27/share.