Shares surge over 600 points on Saudi inflow, expected IMF tranche

Shares at the Pakistan Stock Exchange rose on Tuesday, with experts attributing it to the $2 billion deposited by Saudi Arabia with the State Bank of Pakistan today as well as the anticipation of funds from the International Monetary Fund (IMF).

The benchmark KSE-100 gained 638 points, or 1.38 per cent, to reach 45,200 points at 2:23pm.

Earlier in the day, Finance Minister Ishaq Dar announced that the SBP had received $2bn from Saudi Arabia.

“This inflow has increased the forex reserves held by SBP and will accordingly be reflected in the forex reserves for the week ending July 14, 2023,” Dar said.

The financial support will shore up the depleting foreign exchange reserves at the central bank, which had dipped to cover barely a month of controlled imports.

Yesterday, global rating agency Fitch upgraded Pakistan’s long-term foreign currency issuer default rating to ‘CCC’ from ‘CCC-’, citing the country’s improved external liquidity and funding conditions following the staff-level agreement with the IMF on a nine-month Stand-by Arrangement (SBA) in June.

After the IMF announced the development on June 30, the stock market witnessed its highest single-day gain with the benchmark KSE-100 index rising more than 2,400 points on July 3.

“Market crossed 45,000 points [today] after many days,” Salman Naqvi, head of research at Aba Ali Habib Securities, told Dawn.com, while expressing optimism over the approval of the loan by the IMF in its board meeting on July 12.

He highlighted the positive developments, stating, “Fitch has improved Pakistan’s rating, reducing the risk of default. Additionally, Saudi Arabia has deposited $2 billion and the UAE is expected to provide $1 billion to Pakistan.”

Naqvi further mentioned that bilateral and multilateral donors were anticipated to assist Pakistan, which had triggered a positive sentiment in the market.

He also pointed out that international coal prices had declined and highlighted the plummeting prices of steel, bringing the sector into the spotlight.

Naqvi said the auto sector had also seen a boost after the lifting of import restrictions.

Ali Malik, CEO of First National Equity, said the market has remained bullish after the government struck a deal with the IMF.

“Today, we received $2 billion from Saudi Arabia, and it has become evident that the IMF will formally approve the loan, which will certainly instill confidence in investors,” he said.

Malik said if the situation remains stable and elections are held on time, the market could potentially reach 60,000 points.

Alpha Beta Core CEO Khurram Shehzad also said that the Saudi inflow of $2 billion was the primary driver of today’s rally. He expressed hope that the anticipated inflow of $1 billion from the UAE would also materialise soon.

“External account stability is improving, and despite potential short-term fluctuations, there is room for improvement in the rupee.”

Pakistan had secured a much-needed $3bn short-term financial package from the IMF on June 30, giving the economy respite as it teetered on the brink of default.

The deal — subject to approval by the IMF board in July — came after an eight-month delay and offered breathing space 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 on June 30.