KARACHI
Pakistan Stock Exchange (PSX) is likely to pare declines of the last two weeks after Saturday’s revised budget for the year 2023-24 rekindled hopes for revival of the stalled International Monetary Fund (IMF) loan programme.
Earlier, stocks remained on a losing streak for the second week in a row owing to the uncertainty about the IMF programme, growing political noise, failure of the federal budget to meet investors’ expectations and several other developments.
The benchmark KSE-100 Index fell by 1,235.98 points (-2.99 percent) last week to reach 40,065.32 points from 41,301.3 points. Similarly in the preceding week, the benchmark index fell by 602.9 points (-1.44 percent) from 41,904.2 points to 41,301.3 points. Overall, the index fell by 1,838.88 points during the last two weeks.
Among other indices, the KSE All Share Index slipped by 718.36 points (-2.57 percent) last week to reach 27,202.30 points from 27,920.66 points. The KSE All Share Index came down by 1.18 percent in the preceding week. Likewise, the KMI All Share Islamic Index fell by 563.64 points (-2.75 percent) to 19,924.11 points from 20,487.75 points on a week-on-week basis. The same index fell 0.97 percent in the preceding week.
Finance Minister Ishaq Dar on Saturday introduced a number of changes to the budget 2024 in a bid to revive the International Monetary Fund’s programme and secure a stalled $1.2 billion tranche. Dar said that it was decided between Pakistan and the IMF for a “last final push” to move the review forward, which expires on June 30, following which detailed negotiations were held with an IMF delegation in the last three days to complete the ninth review.
Though the federal government has slapped Rs215 billion more in new taxes on different sectors, the investors will take the new budget within the context of the IMF loan programme and this will raise investor sentiment at the bourse. Moreover, Rs85 billion spending cut would also be achieved without any curtailment in the federal development budget, which will be a positive development.
Moreover, the government last week constituted three special committees to ensure the success of the newly formed Special Investment Facilitation Council (SIFC), with the chief of army staff being one of the members.
On the economic front, the current account balance registered a surplus for the third time in a row, at $255 million, for May 2023, further reducing the 11MFY23 current account deficit (CAD) to $2.94 billion. The surplus got support from a lower trade deficit.
Again, the market is presenting an oversold position where the benchmark index was deprived of around 1,839 points during the last two weeks. The market had been in dire need of any positive indicator and the revised budget may provide the required trigger.
The P/E (price-to-earning) ratio for the KSE-100 Index is currently at its lowest point in June 2023 (4.52) and has fluctuated over time, with the highest in the last 10 years was seen in 2017 (13.22), said Mattias Martinsson, founder and chief investment officer at Tundra Fonder. He stated that these market prices anticipate a collapse in profits and an economic standstill, which has yet to materialise. The significant jump in profits over the past 12 months is mainly attributed to the rupee’s devaluation.
