Stocks to track IMF talks; inflows in focus

KARACHI: Having suffered a spate of whippings last week, stocks will most probably track Pakistan’s parleys with the IMF to get its bogged down loan deal out without which the country remains exposed to a balance of payment crisis, traders said.

Pakistan Stock Exchange’s (PSX) benchmark KSE-100 Shares Index declined 3 percent week-on-week.

Topline Securities’ Nabeel Haroon attributed the outgoing week’s losses to declining foreign reserves and lack of clarity on government’s willingness in implementing IMF’s demand of reversing subsidies on which the revival of the loan programme was contingent.

Armeen Soorani, an analyst at JS Research, said that delay in clarity over economic reforms and uncertainty over the tenure of the newly-formed government took a toll on the equity market in the first half of the week, taking the benchmark index down by 641 points to 42,863 level.

“Nonetheless, some form of comfort over the government staying in position for more than at least a couple of months put a brake on further losses,” she said.

Consistent depreciation of rupee against dollar, closing at its all-time low of 193 this week weighed heavy on the sentiments.

Market participation witnessed a healthy jump this week, as average volumes increased 45 percent week-on-week, while traded value increased 40 percent week-on-week. Banks/DFIs remained key buyers with a net buying of $16 million.

The average traded volume and value for the week stood at 274 million shares and Rs8.1 billion respectively.

During the outgoing week individuals, mutual funds, insurances, and foreign corporations net-sold equities worth $7.55 million, $3.84 million, $3.03 million, and $1.24 million respectively.

On the other hand, meetings with the IMF team are to resume on May 18. Moreover, rates of National Saving Schemes increased by up to 250 bps. Cement and petroleum sales data were also released this week, depicting divergent trends. Petroleum sales for April 2022 grew 32 percent year-on-year, while cement sales declined by 29 percent year-on-year during the same period.

Topline Securities in a report said the removal of subsidies on petroleum products and increase in electricity tariffs etc also added to the woes of the investors in the market.

“Lukewarm response from Saudi Arabia to an official delegation from Pakistan, where the Kingdom reportedly tied $3 billion additional support to revival of the IMF programme, further dampened the sentiments,” he said.

On the other hand, Index provider MSCI Inc. in its semi-annual index review announced the addition of Oil & Gas Development Company (OGDC) and the deletion of Habib Bank Limited from the constituent list of the MSCI Frontier Market Index.