Shares lose 98 points on IMF delay, impending rate hike

Shares at the Pakistan Stock Exchange (PSX) fell on Wednesday, with analysts attributing the downtrend to a delay in signing the staff-level agreement (SLA) with the International Monetary Fund (IMF) for a desperately needed economic bailout, as well as, the impending rate hike. The benchmark KSE-100 index reached an intraday low of 480.65 points, or 1.19 per cent, around 11am. However, it closed at 40,412.77 points, down 97.6 points or 0.24pc. Aba Ali Habib Securities’ Head of Research Salman Naqvi noted that the stock market had also closed in the red yesterday. A number of factors were behind the market’s fall, he said, including the delay in an agreement with the IMF, expectation of a 2pc increase in the policy rate and political uncertainty. “The primary reason is that the staff-level agreement has not been signed yet and there is no indication it will be done in the next few days. The increase in the policy rate will also be negative for the market.” Naqvi also pointed out that ratings agency Moody’s on Tuesday cut Pakistan’s sovereign credit rating by two more notches to ‘Caa3’ — the lowest in three decades, saying the country’s increasingly fragile liquidity “significantly raises default risks”. Besides this, political circumstances were “very tense” and courts were set to announce judgements in a number of cases that would also affect the market, he said. The analyst said the downtrend in the market would continue until the IMF agreement was signed and political uncertainty subsided. Topline Securities Senior Manager Equity Mohammad Arbash also agreed with Naqvi’s view saying that a number of factors affected the market, including the delays in the IMF deal, expectations of higher inflation, political uncertainty and the downgrade in rating by Moody’s.