Stocks will feed on the likely ‘breakout’ of an IMF loan

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KARACHI: Stocks had a stellar outgoing week on the government’s ‘tough steps’ towards an IMF deal, while a breakthrough in talks with the multilateral lender next week

could put the market in a hyperdrive, analysts say.

“Pakistan has met all the conditions to re-enter the IMF program – removal of oil subsidies, hike in electricity tariffs and fiscal measures – and the government is opting to further expand the revenue measures,” said Arif Habib Ltd. (AHL) in a weekly market. report.

He said these measures were expected to bring Pakistan the next $1 billion. “Therefore, we expect the market to be positive over the coming week,” he said and added, “However, the continued depreciation of the rupiah against the greenback will raise concerns about inflation”.

AHL analysts said the market opened the week on a negative note amid concerns over the IMF’s expressed dissatisfaction with measures taken in the 2022-23 federal budget, by which the market plunged 1,135 points in a single session on Monday.

“After the bloodbath, market sentiment turned positive in anticipation of Pakistan’s exclusion from the FATF gray list,” the report said.

The Financial Action Task Force (FATF) cleared Pakistan on all action plans on Friday, but said a visit to check on progress in combating terrorist financing and money laundering could lead to its withdrawal from countries under heightened surveillance. The financial crime watchdog said Islamabad had nearly completed its two action plans, covering 34 items, as it seeks to exit the list where it has been since 2018.

“Pakistan is one step away from being off the gray list, God willing,” minister Hina Rabbani Khar told a news conference in Islamabad.

Another sentimental boost came from the news of China agreeing to roll over $2.3 billion worth of loans to Pakistan and extending additional $2.5 billion in aid to 2 .8 billion dollars.

The government has raised petrol and diesel prices by Rs24.03/litre and Rs59.16/litre, respectively, eliminating the remaining subsidies altogether, fulfilling one of the key IMF conditions.

However, the Rupee continued to depreciate throughout the week against the Dollar, closing at Rs208 (lowest level on record), while SBP reserves fell to $8.99 billion.

The market closed at 42,141 points, up 126 points or 0.3% week-on-week. Average volumes reached 174 million shares, up 3% week-on-week, while the average value traded came in at $25 million, up 16% week-on-week.

Overseas sales reached $1.91 million, compared to a net sale of $0.42 million last week. Significant sales were seen in banks ($1.4 million) and fertilizers ($1.1 million).

On the local front, purchases were reported by businesses ($10.5 million) followed by individuals ($5.8 million).

Positive sector contributions came from E&P (116 points), cement (90 points), WTO (80 points), power generation (56 points) and engineering (51 points) . The main supporting stocks were HUBC (51 points), PSO (50 points), POL (36 points), PPL (32 points) and OGDC (31 points).

The sectors that contributed negatively are commercial banks (263 points), chemicals (34 points) and technology (33 points). The stocks that weighed on the index were UBL (75 points), MEBL (71 points), BAHL (46 points), MCB (44 points) and SCBPL (34 points).

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