After the IMF deal, the policy to keep equities on edge

Stocks remained higher in the outgoing short week as the market is expected to perform positively in the coming week due to the staff-level agreement with the International Monetary Fund (IMF), analysts said on Saturday. analysts.

“As Pakistan and the IMF reach a staff-level agreement, the government plans to raise funds worth $9-10 billion from international financial institutions such as the World Bank, Asian Bank and the Islamic Development Bank, which will help build up reserves,” said a report by Arif Habib Limited. “Although we expect the market to be positive next week. We recommend investors select the scrips.”

The three-day week started on a positive note as the government reached a staff-level agreement with the IMF that would allow the disbursement of $1.2 billion under the Extended Financing Facility subject to the IMF Executive Board approval.

Along with the IMF news, the market also responded positively to Prime Minister Shehbaz Sharif’s approval to cut petrol by Rs18.5/litre and diesel by Rs40.54/litre.

However, on the domestic currency front, the rupee depreciated against the dollar after posting a brief rally following the announcement of the IMF deal. It closed at Rs210.95/dollar, leading to bearish momentum on the last trading day of the week.

The index rose 1.8% week-on-week, gaining 731 points to close at 42,075 points.

Average volumes reached 178 million shares (up 97% on WoW) while the average traded value was $31 million (up 108% on WoW).

The previous week also saw foreign purchases of $1.4 million, down from net purchases of $1.63 million last week.

Significant purchases were observed in all other sectors ($0.43 million) and in banks ($0.36 million). On the local front, sales were reported by banks/development finance institutions ($1.43 million), followed by insurance companies ($1.13 million).

Positive sector contributions came from commercial banks (194 points), cement (99 points), technology and communication (93 points), fertilizers (85 points) and oil and gas exploration companies (82 points).

Positive contributors in terms of certificates were Meezan Bank (84 points), Systems Ltd (70 points), Pakistan State Oil (53 points), Lucky Cement (45 points) and Pakistan Petroleum Limited (39 points).

The sectors that made a negative contribution were automotive assembly (22 points) and pharmaceuticals (9 points). Negative inventory contributions came from Colgate (17 points), Abbott Laboratories (15 points), Millat Tractors (10 points), Pakistan Oilfields (10 points) and EFU General Insurance (9 points).

Analyst Faisal Irfan of JS Research said investors celebrated the resumption of the long-awaited IMF program as Pakistan reached the services-level agreement for the $1.17 billion release. “Additionally, the size of the program has also increased by $1 billion to $7 billion, extending the program through June 2023, subject to board approval,” he said. added.

Along with this, international oil prices remained volatile, where Brent Crude touched a recent low of $94.78 per barrel (September contract) before closing the week above $100 per barrel. To pass on the impact of lower international oil prices and provide relief, gasoline and diesel prices have also been reduced in the country.

All of these positive developments eclipsed the 125 basis point hike in the country’s key rate last week.

During the week, the State Bank of Pakistan raised margin rates on the Export Finance Scheme, Long Term Finance Facility, May FCA; K-Electric got approval for a tariff hike of Rs 9.52/unit; Morinaga Milk sought to increase its share in NMPL; PIA introduced the second Airbus 320 aircraft to the fleet; and the Federal Board of Revenue projected a tax-to-GDP ratio of 9.5%.

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