IMF conditions to keep a check on market

By Shahid Shah
April 02, 2023

Pakistan stocks closed almost flat during the outgoing week, as trade remained range-bound amid economic and political uncertainty, while the market is expected to stay around the IMF deal next week.


“An assurance from ‘friendly countries’ to fund a balance of payments gap is awaited in securing the IMF deal,” said Brokerage Arif Habib Ltd in its weekly market analysis report. “Therefore, the materialisation of said commitment from these countries will help put the IMF programme back on track and aid the sentiment at the index.”

A key event to look out for the next week is the upcoming MPC, in which further rate hike is expected, it reported.

The market witnessed lacklustre activity this week, mainly because of uncertainty over the resumption of the IMF programme. In order to unlock the next tranche, IMF has sought confirmation on external financing from bilateral countries, including Saudi Arabia and the UAE. As a result, rupee

depreciated against the dollar by Rs0.59 or 0.21 percent WoW, closing the week at 283.79/dollar.

Moreover, the SBP reserves showcased a reduction of $345 million WoW, to settle at $4.2 billion.

The market closed at 40,001 points, up 58 points or 0.15 percent WoW. Average volumes arrived at 92 million shares (down 31 percent WoW) while the average value traded settled at $12 million (down 6 percent WoW).

Foreign selling clocked in at $0.3 million compared to a net buy of $0.5 million last week. Major selling was witnessed in fertiliser ($0.9 million) and textile composite ($0.7 million).

On the local front, buying was reported by banks/DFIs ($4.6 million) followed by companies ($4.5 million).

Sector-wise positive contributions came from automobile assembler (61 points), fertiliser (34 points), cement (10 points), insurance (4 points), and glass and ceramics (3 points). Scrip-wise positive contributors were Millat Tractor (57 points), Engro Fertilizers (38 points), Fauji Fertilizer (29 points), Systems Limited (23 points) and Pakistan Oilfields (17 points).

Sectors which contributed negatively were miscellaneous (112 points), commercial banks (20 points), power generation and distribution (17 points), food and personal care products (14 points), and oil and gas exploration companies (11 points). Meanwhile, scrip-wise negative contributions came from Pakistan Services Limited (118 points), Engro (35 points), Bank Al Habib (27 points), TRG (22 points), and Pakistan Petroleum Limited (20 points).

KASB Pakistan Research said during the week, volumes decreased to 59 percent WoW because of uncertainty regarding the resumption of the IMF programme.

The market experienced selling pressure throughout the week with a lack of clarity on the IMF programme as the country did not receive any assurance from bilateral countries. However, there was some improvement in market sentiments on Friday, the last day of the week.

In addition to this, SPI was recorded at a record level of 46.7 percent YoY, indicating a further hike of interest rate by 100bps-200bps.

Moreover, SBP’s foriegn reserves decreased by $354 million reaching $4.2 billion because of external debt repayment. This leaves the import cover at 0.9x month. This along with the withdrawal of cash margin requirement on import would create pressure on the forex reserves.

Moreover, Honda Atlas Cars extended production shutdown for another 15 days to mid-April; government sought over Rs6/unit increase in K-Electric tariff; Khalid Siraj Textile Mills Ltd suspended production, and Bestway Cement completed plant construction in Punjab.