KARACHI: Inflow of US$ 2.1 billion from China and flexibility shown by International Monetary Fund (IMF) on economic benchmarks for the bailout package provided a breathing space to the equity market, as the Pakistan Stock Exchange (PSX) benchmark KSE-100 Index gained 117 points or 0.3% closing the week ended March 29, 2019 at 38,649 points.[the_ad id=”31605″]“Expectations of a rate hike and potential pressure on leveraged sectors kept the market dull. However, IMF team’s visit to Pakistan and news flow regarding consensus on economic policies later in the week created a positive momentum,” an analyst at Arif Habib Limited said.
Market participation remained active during the week as evident from increase in average daily turnover (ADT) and average daily trading volume (ADTV) that increased by 52.9% and 10.4%, respectively. Foreign investors were net buyers, exhibiting an inflow of US$ 0.54 million.
During the week, the government announced to launch another Islamic bond of Rs 200 billion in May’19 to settle circular debt payment with a maturity period of 10 years and a profit rate of KIBOR plus 80bps.
Additionally, the government is eyeing on US$ 2.0 billion from the privatization of 2 power plants (1,223MW Balloki and 1,230MW Haveli Bahadur Shah). Moreover, the PM also announced to launch the much awaited housing scheme for the low income segment in the next month.
Financial Action Task Force (FATF) expressed its dissatisfaction over insufficient measures by the country to counter terrorism and money laundering. Furthermore, the government decided to import an additional 200mmcfd gas from Qatar at a 20% discount from the previous agreement.
On the macro front, foreign exchange reserves held by State Bank of Pakistan (SBP) decreased by US$ 278 million to US$ 8.6 billion due to external debt repayments. Additionally, the country received US$ 2.1 billion loan from China during the week which would increase the SBP’s reserves to US$ 10.7 billion.
Also, Pakistan is expected to secure financial arrangements with IMF within a range of US$ 6.0 billion and US$ 12.0 billion.
Furthermore, the SBP revised the GDP growth rate downward to 3.5%-4.0% on account of subdued performance in agriculture and as well as manufacturing sectors. Also, the government formulated a 5-year policy for foreign direct investment (FDI) where it aims to increase it to US$ 7.4 billion by FY23.
“The central bank has increased the interest rate by 50bps, which is in line with our expectations. Additionally, the government has formally announced it for the first time to adjust the exchange rate at Rs145/USD by June 20’19, which may put pressure on FX rates in the following week, thereby dampening market sentiments,” a report issued by BIPL Securities noted.