Doha talks to decide market direction

Stocks are seen sensitive to the progress of parleys in Doha, Qatar, for the resurrection of International Monetary Fund’s (IMF) loan facility as a possible Sri Lanka-like default is in the brewing, traders said.

KSE-100 closed the week at 43,101 points, down 0.89 percent week-on-week, while average volume for the week stood at 220.8 million against 274.04 million for the last rollercoaster week.

Brokerage Arif Habib Ltd (AHL) in its weekly market outlook said a key event to look out for in the upcoming week is the monetary policy meeting of the State Bank of Pakistan on Monday, “whereby we expect a 100bps rate hike”.

Whereas after the ECP (Election Commission of Pakistan) verdict of voiding the votes of 25 Pakistan Tehreek-e-Insaaf Punjab assembly members, political noise would once again start blaring.

“We believe the market will only heave a sigh of relief once clarity emerges on the IMF programme,” the brokerage said.

Reviewing the outgoing week, AHL said stocks went into a steep fall in the outgoing week amid concerns over the fate of the IMF’s EFF (Extended Funding Facility) programme of $6 billion.

“The revival of the loan is contingent upon the withdrawal of fuel and power subsidies, but the government is still sitting on the fence, running the risk of making its suspension permanent,” the brokerage said.

Whereas, it added, depleting foreign exchange reserves and rupee devaluing to an all-time low level of Rs201/dollar together with the ongoing political upheaval also sent investors stampeding towards exits.

Topline Securities in a note said stocks languished in the week owing to deepening worries over dwindling foreign exchange reserves and lack of will to take drastic measures to resume IMF loan on the government’s part.

During the outgoing week average daily traded volume and value stood at 270.84 million shares and Rs6.18 billion respectively.

On flows front, mutual funds and foreign corporations net sold equities worth $7.3 million and $4.97 million respectively as of Thursday, this selling was largely absorbed by banks and individuals as they purchased equities worth $10.92 million and $4.9 million respectively as of Thursday.

AKD Research said the week started on a bad note with the market as a lack of economic direction weighed heavily.

Though the market recovered in later trading sessions, the trade remained choppy, lacking clear direction throughout the week, the brokerage said.

According to AKD analysts, overall, political uncertainty and indecisiveness over prerequisites for IMF programme resumption have put Pakistan’s economic situation in a tight spot, forcing investors to stay on the sidelines.

Sector-wise, amongst mainboards, fertilisers posted growth as investors moved to high dividend yielding stocks. Engineering also increased 2.4 percent week-on-week.

On the other hand, cement was amongst the worst performers, down 3.1 percent for the week as coal prices continued their upward march.

“We believe the key sentiment driver for the market will be immediate policy formation by the new government,” AKD Research said.

The major challenges ahead for the new government include reserves management, IMF and other foreign inflows, subsidy on petroleum products, and electricity, upcoming budget, sustainability of balance of payments, currency, RDA, remittances, gas tariff hike, etc.