Shares at PSX surge 2,000 points following deal with IMF
The stock market opened in the green on Monday with the benchmark KSE-100 index rising more than 2,000 points following the agreement with the International Monetary Fund (IMF).
The market was up 2,269.23 points at 9:32am from Friday’s close of 41,452.68 points before trading was halted for an hour after the index hit its upper circuit limit.
The index was up 2,414 points at 43,867 at 11:30am. In terms of points, the gain is on track to be its highest ever, and if the market sustains its current gains, it would be its biggest single-day gain in percentage terms since March 2009.
“Today’s gain in benchmark KSE-100 index likely to be highest in the history of Pakistan Stock Exchange,” Topline Securities said in a tweet.
Among the key stocks to advance, automakers rose 6-7.5 per cent on expectations that import restrictions would be lifted under the IMF deal.
Several automakers including Pakistan Suzuki Motor Co had announced prolonged plant closures in 2023, citing import restrictions.
Honda Atlas Cars (Pakistan) and Pakistan Suzuki shares rose 7.5pc to hit upper circuits while Indus Motor Company, which markets Toyota cars in the country, gained 6pc.
Salman Naqvi, the head of research at Aba Ali Habib Securities, attributed the surge to the staff-level agreement with the Fund for a $3 billion stand-by arrangement.
“This is a very good agreement,” he said, expressing the hope that it would also help the local currency to recover. He said that agreement would also pave the way for the release of funds from multilateral and bilateral donors.
He said that the country’s economy had been granted “breathing space”, the effects of which were being witnessed on the stock market.
Ali Malik, CEO of First National Equity, also attributed the rally to the IMF agreement.
“Investors were previously nervous and fearful of doubts that the country might default or could go through very tough economic times. Now they can see a direction of stability going forward,” he said.
Pakistan had secured a badly-needed $3bn short-term financial package from the IMF on Friday, giving the economy a much-awaited respite as it teeters on the brink of default.
The deal — subject to approval by the IMF board in July — came after an eight-month delay and offers some respite to Pakistan, which is battling an acute balance of payments crisis and falling foreign exchange reserves.
The $3bn funding, spread over nine months, was higher than expected as Islamabad was awaiting the release of the remaining $2.5bn from a $6.5bn bailout package agreed in 2019, which expired last week.
Meanwhile, Prime Minister Shehbaz Sharif congratulated the nation and the business community on the rally in the stock market. In a statement, he said that because of the government’s “hard work and sound policies”, there were signs of economic recovery.
He said that the country had “once again” turned towards the path of development, adding that investor confidence had been restored after the standby agreement with the IMF.
Additional input from Tahir Sherani