Reportedly, Pakistan received MEFP on Thursday at the conclusion of the IMF talks in Islamabad; after the GoP committed to impose additional taxation of PKR170 billion and cut in untargeted subsidies.
Participation in the market witnessed significant improvement with average daily trading volume rising above 284 million shares, from 130.78 million shares in the earlier week, up 117.2%WoW.
Alarmingly foreign exchange reserves by State Bank of Pakistan (SBP) plunged to meager US$2.9 billion, import cover of less than 3 weeks. As a result exchange parity came under pressure to close at PKR268.28/US$ on Friday, recording a fall of 2.6%WoW.
Other major news flows during the week included: 1) Prime Minister approved imposition of additional PKR180 billion taxes, hike in electricity and gas tariffs and on top of all GST rate, 2) delay in opening L/Cs for POL products is likely to lead to petrol crisis in another two weeks, 3) fiscal deficit swelled to 2% of GDP, 4) GoP also hinted at withdrawal of power subsidy for exporters, and 5) GoP sucked in PKR464 billion liquidity from the market via MTBs’ sale.
Textile Weaving, Oil & Gas Exploration Companies and Pharmaceuticals sectors were amongst the top performers. Leasing Companies, Synthetic & Rayon and Property were amongst the worst performers.
Major net selling was recorded by Insurance Companies (US$6.5 million). Individuals absorbed most of the selling with a net buy of US$5.9 million.
Top performing scrips during the week were: OGDC, TGL, MUGHAL, ABOT, and SCBPL, while laggards included: PGLC, EFUG, IBFL, HUBC, and JVDC.
All eyes are on the IMF staff-level agreement, with the positive news from IMF subsequently unlocking foreign inflows.
Improvement in the reserves will be a big relief as restrictions on opening L/Cs are expected to ease off. Even though there may be respite in the short term on the back of IMF’s EFF rollback. Investors are advised to remain cautious as the inflation levels may skyrocket to 30% in the coming months.
