IMF loan likely to lift stocks

Having suffered serious blows in the outgoing week, stocks may crawl out of the woods if Pakistan manages to secure International Monetary Fund (IMF) loan down the line, traders said.

KSE-100 Shares Index, the benchmark of Pakistan Stock Exchange (PSX), lost 1,547 points or 3.3 percent lower, to close at 45,749 points week-on-week.

Brokerage Arif Habib Ltd in its weekly stock report said despite noise gaining traction on the economic front it was believed there was some silver lining.

“1QFY22 fiscal deficit declined by 9.2 percent year-on-year whereas local production also appears under control, auto sales and fertiliser off-take increased.”

“Therefore, we believe the market sentiment is hinged upon announcement of the IMF package, which is currently being stalled by two departments of the IMF,” it said adding, “Once through, the market is likely to post a rebound”.

Stocks this week showed weakness as market participants appeared panicked over the delay regarding resumption of the $6 billion EFF (extended fund facility) for Pakistan. As a result, economic outlook appeared dubious.

To add to the pressures on economy, rupee this week came down to Rs175.73/USD against Rs170.01/USD last week, as future disbursement of foreign flows remains uncertain prior to IMF tranche release, while high

CPI (consumer price index) reading will implicate the government’s fiscal estimates (subsidies on staple foods etc to control rising inflation).

Average volumes clocked in at 316 million shares, down by 26 percent week-on-week, while average traded value settled at $63 million, down 29 percent week-on-week.

Foreign selling continued this week, clocking-in at $5.3 million compared to a net sell of $11.2 million last week.

Major selling was witnessed in commercial banks ($7.6 million) and cement ($3.0 million).

On the local front, buying was reported by companies ($6.5 million) followed by insurance companies ($5.7 million).

Sector-wise negative contributions came from banks (277 points), cement (255 points), technology (226 points), E&P (140 points), and engineering (90 points).

Scrip-wise negative contributors were TRG (140 points), PPL (73 points), OGDC (70 points), LUCK (65 points), and UBL (65 points).

Supporting sectors included fertilisers (37 points), and glass and ceramics (3 points).

Meanwhile, scrip-wise support came from FFC (48 points), EFERT (17 points), and ABL (9 points).

During the week foreign exchange reserves exceed $24 billion mark on official inflows, sales tax on petrol was reduced, November RLNG price was 105 percent higher than last year, BlueEX sought to raise Rs446 million in second GEM listing, and Q1 ended with budget deficit of 0.8 percent of GDP.

Other important news included reports that government was looking to generate Rs250-300 billion through petroleum levy, implying prices of petroleum products mighty increase further going, government signed $761 million finance facility with International Islamic Trade Finance Corporation for import of crude oil, refined petroleum products and LNG etc, Minister of Energy statement that SNGP UFG losses have now declined to 8.9 percent from 11.8 percent back in 2018.