IMF bailout hammers stocks

KARACHI: Stocks on Monday plunged 2.35 percent, posting the biggest single-day loss in 108 sessions as panicked investors ran for the exits, fearing the targets tied with International Monetary Fund’s (IMF) bailout agreement reached over the weekend will drag the economy as well as corporate earnings down into dumps, dealers said.

Pakistan has finalised a deal with the IMF for a three-year, $6 billion bailout package to underpin its flimsy public finances and get the sluggish economy going.

Analyst Ahsan Mehanti from Arif Habib Corporations said the record fall was primarily owing to investor fears on impact of unknown prior actions for IMF board approvals and agreed IMF conditions in the upcoming budget to obtain a 39-month Extended Fund Facility (EFF).

“Expected increase in taxes and utility prices, sharp fall in projected growth rate at 3.3 percent in FY19, projections for 6.5-7 percent fiscal deficit to GDP, and expected tightening in SBP policy rates led to a bearish close,” Mehanti said.

Pakistan Stock Exchange’s (PSX) benchmark KSE-100 shares index lost 2.35 percent or 816.15 points to close at 33,900.38 points level, whereas KSE-30 followed suit with a low of 2.22 percent or 364.23 points to end at 16,022.43 points level.

During an intra-day trade the benchmark KSE-100 Shares Index lost 937 points or more than 2.7 percent Of 336 active scrips, 36 moved up, 287 retreated, and 13 remained unchanged.

Market participation in terms of volumes went up by 209 percent to 121.210 million shares from 39.286 million on Friday. Similarly, value was up 202 percent to Rs5.3 billion.

The capital market opened on a positive note and recorded an increase of nearly 400 points at one stage as the uncertainty about agreement with the IMF got cleared. However, the gains failed to sustain and index slipped sharply.

The IMF forecasts Pakistan’s economic growth slowing to 2.9 percent this fiscal year from 5.2 percent in 2018, while the central bank has cut its estimate to between 3.5-4 percent.

Muhammad Faizan, head of foreign institutional sales at Next Capital Limited said the market opened on a buoyant note and went more than 500 points positive before the panic-prone investors started to jettison shares amid the tough conditions attached with the IMF bailout. “Heavy sell-off in the market pushed the index to close at 33,900 points.”

Salman Ahmad, head of institutional sales at Aba Ali Habib Securities, said one uncertainty about the agreement, which has been dragging for 12 days, finally ended.

“However, now investors need clarity on part of the decisions to be taken by the government and need some official word by how much volume electricity, gas and interest rates to witness a hike.”

Moreover, Ahmad said investors were largely worried about the dollar/rupee parity as it weighed heavily on them as most of the foreign investment and foreign agreements with earnings of the companies were linked with the currency fluctuation.

Faisal Shaji, Strategist at Standard Capital said, “After making a high of 511 points after the much awaited agreement, KSE-100 index melted down (low of 936 points) and breached 34000 points level”.

“It is a complete devastation amid government apathy of not paying attention with absolutely no direction whatsoever given from the top,” Shaji said.

There have been at least 74 lower caps, he said adding while the government was the biggest stakeholder in the market and can act with various methods.

Rumours were also abounding about Pakistan's exit from MSCI emerging market which created panic, Shaji explained. The highest gainers were Siemens Pakistan, up Rs9 to close at Rs647.00/share, and Pakistan Hotels, up Rs5.14 to finish at Rs141.14/share.

Companies that booked highest losses were Pakistan Tobacco, down Rs130 to close at Rs2470/share, and Mari Petroleum, down Rs49.29 to close at Rs936.70/share.

K-Electric Limited recorded the highest volumes with a turnover of 9.812 million shares. The scrip lost Rs0.24 to close at Rs3.98/share.

The lowest volumes were witnessed in Lotte Chemical, recording a turnover of 3.577 million shares, whereas the scrip loss Rs0.94 to end at Rs14.05/share.