Stocks managed to make modest gains on Tuesday, with analysts attributing it to the rupee’s recovery as well as the International Monetary Fund’s (IMF) statement that Pakistan has completed all prior actions required for the review.
The benchmark KSE-100 index closed at 40,191.61 points, up 115.65 points, or 0.29 per cent from yesterday’s close.
The index, which closed in the red yesterday as record inflation triggered selling, opened on a negative note with the market losing over 300 points shortly after trading resumed.
However, the KSE-100 recovered later with an intraday high of 40,458.09 points.
Head of Research at Intermarket Securities, Raza Jafri, said the IMF’s “reassurance that all prior actions have been met is acting like a shot in the arm”.
“There is also a growing belief that even if politics remains noisy in the near-term, Pakistan’s economy is stabilising. This is improving sentiment, which is also reflected in the foreign exchange market.”
Salman Naqvi, head of research at Aba Ali Habib Securities, said there were a number of reasons for the stock market’s “positivity”, including a reduction in the prices of commodities internationally, better tax collection figures, the encouraging news from the IMF and the rupee’s strengthening.
“These things are apparently favourable,” he said. In addition, the Election Commission of Pakistan’s (ECP) verdict in the prohibited funding case against the PTI did not appear to be as damaging as expected, Naqvi said.
“It could have dented the market but it appears to be a neutral decision. The market has reacted to it positively. “
Naqvi said the market’s course in the coming days would be determined by the release of the tranches by the IMF, the exchange rate and the inflation figures.
Ahsan Mehanti of Arif Habib Corporation also attributed the KSE-100 index’s rise to the rupee’s recovery and the IMF’s statement.
He added that Finance Minister Miftah Ismail’s assurance of timely debt repayments and the ECP’s verdict “played a catalyst role in bullish activity”.
Earlier today, the rupee gained 46 paise in the interbank market — the third consecutive day of the local currency’s recovery.
Overall, the PKR has gained Rs1.56 in the interbank market since Friday. Prior to that, the rupee had been on a consistent decline since July 16.
Separately, the IMF’s resident representative in Islamabad, Esther Perez Ruiz, said that Pakistan has completed the last prior action required for the Fund’s combined seventh and eighth review by raising the petroleum development levy (PDL).
“With the increase in PDL on July 31, the last prior action for the combined seventh and eighth review has been met. The [Executive Board] meeting is tentatively planned for late August once adequate financing assurances are confirmed,” she said in a statement.
Pakistan and the IMF signed a $6 billion bailout accord — Extended Fund Facility (EFF) — in 2019. But the release of a $1.7bn (seventh and eighth) tranche has been on hold since earlier this year, when the IMF expressed concern about Pakistan’s compliance with the deal.