KARACHI: Bulls in Pakistan’s stock market celebrated receiving $1 billion, the first tranche from Saudi Arabia’s bailout package, with the benchmark KSE 100 index gaining 66 points to close at 41,352 against Monday’s loss of 307 points.
The installment eased the pressure on the Pakistani rupee, too, in both the open and inter-bank markets. “Receipt of $1 billion tranche of financial assistance from Saudi Arabia to ease external account crises, recovery in global crude prices, upbeat data on exports, remittances and surging local cement and fertilizer prices played a catalyst role in bullish close at Pakistan Stock Market,” Ahsan Mehanti, Chief Executive of Arif Habib Corporation, said.
Pakistan’s share market was volatile last week as investors continued to remain on the back foot, wary of Morgan Stanley Capital International’s (MSCI) Semi‐Annual Index Review, which was published on November 13. Later during the week, after a confirmation by the Saudi envoy that the Kingdom would release $3 billion in the next few days — from the $6 billion bailout package promised to Pakistan — investors’ confidence was back on track.
On Tuesday, 167 million shares worth Rs7.6 billion were traded on the equity market. “Stocks showed recovery as investors weighed government austerity measures and resistance over IMF terms for a bailout package,” Mehanti said.
However, no major fluctuation was witnessed in the currency market even as dealers said the inflow of the Saudi bailout money had stabilized the market which is trading at Rs134 against the dollar.
“The currency market is under pressure due to a larger gap as compared to the inflows,” Zafar Paracha, General Secretary of Exchange Companies Association of Pakistan, told Arab News.
“The inflow has given moral strength to the bulls as the market was in a depressed mode due to the large gap which the country needs to fill [in terms of its] external payments,” he said.
Even though Finance Minister Asad Umar has declared that “there is no fiscal emergency and balance of payment crisis is over,” the country needs $12 billion to fund its external payment obligations.
“The Saudi assistance has minimized the specter of a further weakness of the Pak Rupee against US dollar and in fact has stabilized the market to large extent,” Malik Bostan, President of Forex Association of Pakistan told Arab News.
“There were talks in the market that Pakistan won’t get anything from KSA but tranche has dispelled the impression. An additional inflow of remaining $2 billion from the KSA in the next two months would strengthen the currency market,” he said.
The first installment from Saudi Arabia received on Monday has strengthened the country’s position in terms of its foreign exchange reserves from $7.48 billion, till November 9, to around $8.4 billion on Tuesday.
Pakistan has been negotiating with its allies ­­-- including KSA, UAE, and China – for monetary assistance to overcome the current account deficit. Prime Minister Imran Khan’s economic managers are also negotiating with the International Monitory Fund (IMF) for another loan to meet the economic challenges. Though the exact quantum of IMF loan has not been determined, the finance minister last week said that the country may need $5 to $6 billion from the global financial body.