IMF bailout uncertainty: Stocks, rupee plunge; power gets dearer

KARACHI/ISLAMABAD: Stocks on Monday fell steeply, while the rupee hit a record low as markets panicked on reports that the budgetary measures are not enough to secure IMF bailout, renewing concerns over how the government would dodge a default without the lender of the last resort, traders said

Analysts said massive taxation measures on the earnings of the corporate sector crushed investor sentiment, while IMF’s dissatisfaction with the federal budget might delay the loan revival.

KSE-100 Shares Index, the main gauge of the country’s capital market, Pakistan Stock Exchange's (PSX), lost 1,134 points or 2.70 percent to end at 40,879.93 points after swinging between 42,069.65 and 40,833.50 points.

The rupee dropped 0.74 percent to 203.86 against the dollar at the close in the interbank market. It ended at 202.35 on Friday. In the open market, the currency fell by two rupees. The rupee was trading at 205, compared with 203 in the previous session. Separately, Nepra has allowed the power distribution companies to collect an additional Rs3.9923 per unit from consumers in the June-2022 bills.

Zafar Moti, a former director of PSX, said it was not a session, it was a fallout of the budget. “Volumes have shrunk and there is no depth in the market,” Moti said, adding, “The economy is in the doldrums and IMF talks are not clear”.

Pakistan’s plan to trim its deficit by slashing spending may not be enough to convince the International Monetary Fund to resume its loan program, Bloomberg reported, citing economists at Citigroup Inc.

Analysts said the market was worried about the fate of the IMF programme and the uncertainty on the bailout made more dents in the already battered rupee. “The rupee also lost ground, tracking a steep fall in the stock market and the rise in the US currency against the other major currencies. This is playing in the mind of the local traders,” he added.

Arif Habib Corp’s Ahsan Mehanti attributed Monday's mammoth losses to post-budget consolidation after huge taxes were slapped on high earning blue-chip corporate firms and banking sector; and tax credits were removed from insurance, mutual funds, and pensions funds.

Traded volume at the bourse contracted by 48 million shares to 163.793 million shares, while value increased to Rs4.352 billion from Rs3.069 billion. Market capital, however, narrowed to Rs6.843 trillion from Rs7.021 trillion.

The Finance Minister Miftah Ismail statement that the budgetary figures were provisional and subject to the IMF deal also dampened sentiments. Ismail said the R9.5 trillion budget might change in the light of any deal with the IMF.

Topline Securities in a post-market note said investor confidence was shattered by reports that, dissatisfied with the budgetary measures, the IMF might demand harsher measures and amendments to that effect in the finance bill for the next fiscal year.

The banking sector took a major battering, due to a massive increase in the taxation of the sector’s profitability. The UBL, HBL, BAHL, MEBL, and MCB lost 397 points, cumulatively. On the flip side, MTL, HIGHNOON, and HGFA witnessed some buying interest as they added 24 points collectively.

Millat Tractors jumped Rs11.89 to Rs876.94/share to become the best gainer of the day, closely followed by Al-Ghazi Tractors, which secured Rs11.66 to close at Rs390/share. The worst performing stock was Unilever Foods as it shed Rs1,800 to close at Rs23,000/share, followed by Sapphire Textile that lost Rs78.83 to end at Rs1,095.67 per share.

JS Research recommended investors to remain cautious and wait for any fresh buying opportunities. Hum Network topped the volume chart with 24.561 million shares, followed by Cnergyico PK with 6.893 million shares.

Analyst Khurram Schehzad at Alpha Beta Core said that stocks had lost a market value of $8 billion since April 9, 2022. The National Electric Power Regulatory Authority (Nepra), meanwhile, allowed the power distribution companies (Discos) to collect an additional Rs3.9923 per unit from consumers in the June-2022 bills, as in April 2022, they were charged less against the actual cost of fuel for power generation. The decision would not apply to K-Electric and the lifeline power consumers.

The power regulator on Monday issued its decision about monthly fuel charges adjustment (FCA) on account of variations in the fuel charges for April. Earlier, in March 2022 FCA was decided at Rs2.8680/unit and Rs4.8530/unit for February which was recovered from consumers in their power bills for April and May 2022, respectively.