Pakistan’s capital, currency, bullion markets celebrate IMF agreement

KARACHI: The $3 billion deal with the International Monetary Fund (IMF) brought a massive boost to Pakistan’s economy on Monday, surging its stocks by a staggering 2,400 points, easing the inflation rate for the first time in seven months to 29.4 per cent, and strengthening Rupee in the open market.

Stocks closed higher with the highest-ever single-day increase of 2,446 points to a 14-month high level celebrating the staff-level agreement between Pak-IMF teams, which also recorded the quickest halt of the index, as it opened above 5 per cent and stood there throughout the day, traders said.

The Pakistan Stock Exchange’s (PSX) benchmark KSE 100-share Index closed higher by 2,446.32 points or 5.90 per cent to 43,899.01 points against 41,452.69 points recorded in the last session. The highest index of the day remained at 43,933.95 points while the lowest level of the day was recorded at 41,452.69 points.

Analyst Ahsan Mehanti at Arif Habib Corp said, “Stocks showed highest ever surge with KSE-100 index up by 2,446 points after IMF staff-level agreement (SBA) to secure $3bn bailout financing and Barclays rating upgrade to market weigh on Pakistan Sovereign Bonds.”

He said a massive surge in Pakistan Euro bonds after hopes of new financing from other bilateral and multilateral agencies, Moody’s assertion on IMF program approval to support for macroeconomic stability and 29.4pc upbeat CPI inflation data for Jun ’23 played a catalyst role in the bullish close.

KSE-30 index also increased by 933.49 points or 6.38 per cent to 15,570.22 points compared with 14,636.72 points recorded in the last session.

Traded shares increased by 47 million shares to 381.904 million shares from 234.748 million shares. The trading value increased to Rs8.647 billion from Rs7.476 billion. Market capital expanded to Rs6.687 trillion from Rs6.369 trillion. Out of 357 companies active in the session, 315 closed in green, 36 in red and 6 remained unchanged.

Analyst Ali Najib at Topline Securities said it was “The Most Bullish Day” at Pakistan equities as far as positive closing (in gaining points) goes. “2,446 points gained by KSE100 index (up 5.90pc) today, the highest ever gain (in points term) since the KSE100 index’s inception in Nov 1991. The day closed at 43,899 level last seen in May ’22, almost 14 months ago,” he said.

The market halted just after 7 minutes from the opening bell in the morning, as the free float index rose 5 per cent and remained stable at 5 per cent for 5 minutes to trigger an Exchange halt. “The aforesaid halt was the quickest “Bull Run Market Halt” (happened at 9:37 am) as, previously, investors experienced “Bull Run Market Halt” on April 17, 2020, at 10:52 am, signalling bullish aggressiveness and further price appreciation in the days to come in stocks at PSX,” he said.

Over 40 per cent of the index constituents hit their limit up for the day.

Buying sentiment was observed across the board. SYS, HUBC, ENGRO, UBL & LUCK contributed positively by adding 671 points, collectively.

The highest increase was recorded in Nestle Pakistan shares, which rose by Rs152.50 to R6,600 per share, followed by Colgate Palm, which increased by Rs76.90 to Rs1,199.72 per share. A significant decline was noted in Pak Engineering, which fell by Rs24.34 to Rs300.21 per share, followed by ZIL Limited, which decreased by Rs22.50 to Rs277.50 per share.

WorldCall Telecom remained the volume leader with 54.999 million shares which closed higher by 14 paisas to Rs1.23 per share. It was followed by K-Electric Ltd. with 30.596 million shares, which closed higher by 24 paisas to Rs1.96 per share.

Other significant turnover stocks included Cnergyico PK, Telecard Limited, Fauji Foods Ltd, Pak Int. Bulk, Hascol Petrol, Pak Elektron, B.O. Punjab and Bankislami Pak.

Shares’ turnover in the future contracts decreased to 67.527 million shares from 175.204 million shares.

Honda Atlas Cars (Pakistan) and Pakistan Suzuki shares rose 7.5pc to hit the upper limits of trading bands, while Indus Motor Co, which markets Toyota cars in the country, gained 4.2pc.

Also, inflation rate showed signs of improvement as it eased for the first time in seven months to 29.4pc in June 2023, down from an all-time high of 38pc in the previous month. This development sparked speculation that the central bank’s key policy rate, which reached its peak at 22pc, may soon begin to reverse in the coming months, potentially leading to reduced bank financing costs for industries and businesses.

In contrast to the current rate, inflation in June of the previous year stood at 21.3pc. Notably, there was a 0.3pc decrease in the consumer price index (CPI) compared to the preceding month.

June’s inflation in Pakistan marked the lowest year-on-year monthly reading since January 2023, with an average inflation of 29.18pc for the fiscal year 2022-23, significantly higher than the 12.15pc recorded in FY22. Notably, in the four months from February to May 2023, CPI inflation remained above 30pc.

The surge in inflation began in November 2022, with the rate reaching 14.6pc and peaking at 38pc in May 2023. However, in June 2023, it reversed its trajectory, leading independent economists to predict that the deceleration will continue in the coming months, albeit at a slower pace.

In June 2023, core inflation in Pakistan, which excludes food and energy components, also reversed its upward trend after seven months and was recorded at 18.5pc, down from 20pc in the previous month which was the highest level since 2010. In June 2022, core inflation was at 11.5pc. Core inflation serves as a key indicator for the State Bank to determine whether to increase the discount rate.

Historically, Pakistan’s inflation rate averaged 8.21pc from 1957 until 2023, reaching an all-time high of 38pc in May 2023 and a record low of -10.32pc in February 1959.

Meanwhile, the Pak Rupee gained strength against the US dollar, euro and Britain pound in the open market on Monday, led by dollar selling by customers after Pakistan reached the IMF deal.

According to Malik Bostan, Chairman of the Exchange Companies Association of Pakistan (ECAP), the local currency rose 5 rupees to 285 per dollar. The rupee was reportedly being traded at a rate of 270–275 per dollar, according to some exchange companies, Bostan added.

Due to Monday being a bank holiday, the interbank rate was unavailable.

Ishaq Dar, the country’s finance minister, stated on Twitter that the open market exchange rate for the rupee was between 270 and 272 per dollar.

“On the first day of business following the Eid holidays, some exchange companies were operating,” Bostan said.

The exchange companies ran out of local currency to give to consumers after buying dollars from them since there were no purchasers but only sellers of US currency. The open market was consequently shut down after two hours, Bostan added.

According to Bostan, when the interbank market opens on Tuesday, everyone will be watching it, and the open market will follow. He anticipated that the rupee will increase to between 270 and 275 in the coming days.

But according to ECAP General Secretary Zafar Paracha, because Monday was a bank holiday, exchange companies were also closed.

Analysts predict that the rupee would increase in the near future due to optimism surrounding the new Standby Agreement with the IMF. However, given that the opening of foreign exchange markets and the relaxation of import restrictions will put pressure on the currency and cause any rebound to be transient.

The price of per tola gold also decreased by Rs8,800 to close at Rs207,200 while the price of 10 grams of 24 carats gold saw a decline of Rs7,544 to settle at Rs177,641, according to the All-Pakistan Sarafa Gems and Jewellers Association’s (APSGJA) data.

The price of silver also saw a massive drop; silver per tola plunged by Rs50 and currently stands at Rs2500 while the price of 10 grams dropped by Rs42.87 and currently stands at Rs2,143.