https://arab.news/rqy9u
- Pakistani investors reacted negatively to US Federal Reserve’s decision to hike interest rate
- Delayed talks between IMF, Pakistan also caused equities to close on bearish note, say analysts
KARACHI: Pakistan’s equities at the stock market closed on a bearish note on Thursday, with analysts crediting a decline in overseas workers’ remittances, rising tensions with Afghanistan and a further hike in US interest rate as the main reasons.
Trading at Pakistan’s stock market kicked off on a positive note on Thursday as investors cheered on Engro Pakistan’s decision to purchase or buyback 70 million shares worth Rs18.8 billion ($84 million).
However, the trend could not last for long. The US Federal Reserve, which has raised its interest rate by half a percentage, projected a further hike by the end of 2023, according to Topline Securities.
Apart from external factors, data on workers’ remittances and the deteriorating security situation at the Pak-Afghan border in Chaman influenced a change in investors’ sentiments which led to the market closing on a bearish note.
The benchmark KSE100 shed 557.8 points to close at the 41,179 level.
“Stocks fell across the board as investors weighed the slump in remittances by 14.3 percent Year on Year (YoY) in November 2022 to $2.1 billion and the surging Treasury bill yields,” Ahsan Mehanti, CEO of Arif Habib Corporation, said.
“Security unrest at the Pak-Afghan Border, economic instability and investor concerns for the outcome of the Pakistan-International Monetary Fund (IMF) talks over the ninth review played a catalyst role in bearish close,” he added.
Pakistan reported one civilian dead and 11 others injured due to firing from the Afghan side of the border on Thursday. Authorities said Afghan forces fired mortars toward civilians near the southwestern Chaman border crossing, reflecting the increasing tension between the neighboring countries.
Thursday’s incident took place a couple of days after six Pakistani civilians were killed in cross-border shelling which Pakistan blamed on Afghan security forces.
On the other hand, Pakistan received 4.8 percent and 14.3 percent less workers’ remittances during the month of November 2022 on a monthly and yearly basis. The total workers’ remittances recorded an inflow of $2.1 billion during November 2022, according to the State Bank of Pakistan.
Analysts said political instability in the country and the delayed IMF program review also contributed to the trading at the stock market on Thursday.
“The equity market also reacted to yesterday’s announcement of former prime minister Imran Khan to dissolve provincial assemblies on December 17, 2022, and the expectation of the IMF program moving forward in January 2023,” Tahir Abbas, Head of Research at Arif Habib Limited, told Arab News.
On Wednesday, IMF representative in Pakistan, Esther Perez Ruiz, termed discussions between Pakistan and fund officials “productive” to date in the context of the country’s ninth review of its loan program.
Pakistan, which has been in the IMF’s loan program since 2019, had increased the size and tenure of its loan from the original $6 billion to $7 billion which would conclude in June of next year.
The completion of IMF program will enable the South Asian country to draw around $1.1 billion from the fund. The inflows would be vital for Pakistan, which has foreign reserves only to cover roughly import payments for a month.