Pakistan stocks touch new high on anticipated IMF agreement, low inflation​

The Pakistan Stock Exchange hit a new all-time high on Thursday morning on expectations that the government would soon reach an agreement with the International Monetary Fund (IMF) for the first loan review of a $1 billion loan program.

The benchmark KSE-100 index was trading at 119,417.93 points around 9:49 AM, up 1,443.91 points or 1.22% from the previous day's close of 117,974.02 points.

An analyst told Nukta that the rally was driven by the government's move to resolve longstanding circular debt where some funds would likely be released to listed power companies.

Another factor is the expectation that the government and IMF will soon reach a staff-level agreement on the release of a $1 billion loan tranche. Policy-level talks are being held virtually to resolve all issues pertaining to tax collection and lowering of subsidies.

The market also gained sharply on the back of expectations that the inflation rate for March would be below single digit — a nearly three-decade low.

Salman Ahmed, head of institutional sales at Aba Ali Habib, told Nukta that all shares that would benefit by the resolution of circular debt have been in green.

Moreover, auto sector is in the limelight after clocking in good sales numbers.

Meanwhile, the cement sector showed gains on the hope that margins will improve as coal prices — a main ingredient to produce cement — have been on a downhill course.

Mohammad Sohail, CEO of Topline Securities, said the rally was led by local institutional buying. "There is optimism that IMF staff-level deal will be done soon. Moreover, government efforts to resolve old circular debt will help emerging sector companies cash flows," he stated.

There has been a little concern about the decline in the rupee's value which has touched 14-months low of 280.25. However timely release of $1 billion from IMF would open gates for more funding from Asian Development Bank, World Bank, and International Finance Corporation which would help stabilize the exchange rate.