Record increase: KSE-100 gains 2,446 points as investors rejoice over IMF deal

Pakistan’s stock market witnessed a historic day on Monday with the benchmark KSE-100 Index posting the highest ever day-on-day (DoD) increase of 2,446 points or 5.9% in the first day of trading following a staff-level agreement with the International Monetary Fund (IMF).

At close, the KSE-100 settled at 43,899.

“On a day-to-day basis, it (the index) displayed the best performance ever,” said Tahir Abbas, Head of Research at Arif Habib Limited.

In the last three trading sessions, the KSE-100 has now increased by 3,834 points or 9.57%, he added.

The bull-run at the Pakistan Stock Exchange (PSX) is a direct result of Islamabad and the IMF reaching a staff-level agreement on a new nine-month, $3-billion stand-by arrangement, which was announced on Friday.

Pakistan’s staff-level agreement with the IMF is subject to approval by the lender’s Executive Board, with its consideration expected by mid-July.

The development is seen as a major breakthrough for the government that was scrambling to secure the ninth review of its previous bailout programme and running from pillar to post to secure dollar inflows amid fast-depleting foreign exchange reserves.

A last-minute agreement with the IMF not only averts default, at least for a year, but also gives a much-needed roadmap for an economy in severe distress.

Trading halt

Just minutes into trading, the increase had breached the 5% barrier for a consecutive 5 minutes, prompting a trading halt for an hour. Trading resumed at around 10:37am, but the index stayed above the 5% barrier.

“The Pakistani (stock) market opens at all-time record high,” Topline Securities CEO Mohammed Sohail had said earlier in the day.

“Out of the total index halts witnessed in the PSX’s history, today’s halt marked the second time only that it occurred in a positive upswing,” said Abbas.

In contrast, there have been seven previous instances of halts in negative movement, he said.

Explanatory note by PSX:

In case, KSE-30 Index continues to trade 5% above or below its last-day’s closing index value, trading in all securities shall be halted for a certain duration.

Across-the-board buying in index-heavy sectors

On Monday, investors were seen picking up stocks in droves with across-the-board buying witnessed in index-heavy sectors including auto assemblers, cement, chemical, commercial banks, oil and gas exploration companies and OMCs trading in the green.

Removal of import restrictions by the State Bank of Pakistan (SBP), a key condition of the IMF, was also seen as a major positive for companies that have had to endure curbs on bringing in much-needed raw material and goods.

“Investors’ confidence is sharply reviving as a result of the staff-level agreement with the IMF and $3 billion standby arrangement,” Prime Minister Shehbaz Sharif said in a statement.

Meanwhile, experts, reacting to the PSX record run, said the new IMF programme is a better deal than just the ninth review.

“Doing the SBA instead of the ninth review has two benefits,” Mustafa Pasha, Chief Investment Officer at Lakson Investments Limited, told Business Recorder.

“Firstly, the country will receive $3 billion instead of $1.1 billion. Secondly, Pakistan will be in an IMF programme during the transition to a caretaker government and elections that are usually a period of uncertainty. Negotiations with the IMF are difficult during this time.

“It also means chances of receiving additional funding from bilateral/multilateral sources increase. Thus, the fear of a severe clampdown on imports, sharp currency depreciation and default has been averted, at least till a new government can settle in and negotiate a fresh IMF program in 2024,” he added.

Another expert said the record-open is a reaction to the IMF agreement.

“This is a reaction to the IMF-Pakistan SBA agreement reached on Friday,” Samiullah Tariq, Head of Research at Pak Kuwait Investment Company Limited, told Business Recorder.

“The index is expected to reach the 44,000 level. After this gain, we expect stability to persist,” he added.

On the economic front, as per the latest data released by the Pakistan Bureau of Statistics (PBS), CPI inflation increased to 29.40% on a YoY basis in June 2023 as compared to an increase of 38% in May 2023.

Volume on the all-share index soars to 381.9 million

Sectors pushing the benchmark KSE-100 Index towards the green zone included banking (542.91 points), oil and gas exploration (305.42 points) and fertilizer (272.23 points).

Volume on the all-share index soared to 381.9 million from 234.7 million on Tuesday last week, while the value of shares traded jumped to Rs8.6 billion from Rs7.4 billion recorded in the previous session.

WorldCall Telecom was the volume leader with 54.9 million shares followed by K-Electric Limited with 30.6 million shares and Cnergyico PK with 22.4 million shares.

Shares of 357 companies were traded on Monday, of which 315 registered an increase, 36 recorded a fall and 6 remained unchanged.