IMF loan to define market trend

The approval of the International Monetary Fund (IMF) loan will steer the market down the line, as the government has met most of the terms dictated by the “lender of last resort,” traders said.

The benchmark KSE-100 stock index closed at 46,489 points, up 740 points, up 1.6% week-over-week.

Brokrage Arif Habib Ltd in its weekly market report said that with monetary policy finally announced, the market is now expected to react accordingly next week.

He said the recent bill to make the SBP stand-alone, along with the latest monetary stance, should now effectively remove another IMF precondition.

“Therefore, we believe that market sentiment is now dependent on the announcement of the IMF package for Pakistan,” the brokerage said, adding: “Once completed, the market should show a rebound.”

In the outgoing week, stocks started on a negative note amid uncertainty over IMF loan disbursements and mounting inflationary pressure, but gained momentum with the government agreeing to pay $ 190 billion. rupees to IPPs (independent power producers) and the status quo of oil prices.

However, the pressure has returned due to noise from the SBP which could raise the key rate by 100 basis points (bps). However, against market expectations, the central bank tightened monetary policy by 150bp. This higher than expected increase was largely the result of a worsening current account deficit which reached $ 5.1 billion in 4MFY21, from a positive balance of $ 1.3 billion last year. However, the banking sector recovered on the day of the monetary policy meeting. Alpha Adhi Securities, in a note, said the SBP raised its policy rate by an unforeseen amount of 150 basis points to 8.75% in its November 2021 monetary policy statement to address growing risks associated with inflation, the balance of payments and the depreciation of the rupee.

The SBP has also increased the frequency of monetary policy meetings from six to eight times a year in order to closely monitor developments in the economy and make decisions with caution, the brokerage said adding that the next meeting was now scheduled for December 14, 2021.

“A 150 basis point hike strikes the right balance,” said the SBP governor. The same also aligns with market expectations as reflected in secondary market yields which were up 100 to 150 basis points even before the revised Monetary Policy Committee meeting announcement.

Average volumes reached 245 million shares, down 23% week-over-week, while average trade value fell 17% to $ 53 million week-over-week .

Foreign sales continued this week, reaching $ 25 million from a net sale of $ 5.3 million last week. Significant sales were observed in commercial banks ($ 14.7 million) and fertilizers ($ 4.7 million). Locally, the purchases were reported by insurance companies ($ 13.5 million) followed by other companies ($ 7.7 million).

Sectors that supported the index included banking (403 points), fertilizers (172 points), cement (158 points), exploration and production (140 points) and electricity (43 points). The positive contributors in terms of scripts were MEBL (96 points), LUCK (76 points), UBL (73 points), PPL (72 points) and MCB (71 points).

The lagging sectors are technology (-176 points) and consumer goods (-41 points). The stocks that lost gains were TRG (233 points), UNITY (32 points) and PSX (16 points).

During the week, the government decided to pay IPPs 190 billion rupees in nightclub equity, remittances reached $ 10.6 billion in July-October, and FDI fell 12% in 4 month.

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