KARACHI: The Pakistan stock market recovered more than 400 points at the close of the weekend session, energized by the announcement on Friday by the UAE that it would deposit $3 billion in Pakistan’s central bank "in the next few days" to support the country's monetary policy.
On Friday, UAE’s state news agency WAM reported that the Abu Dhabi Fund for Development would deposit the amount in the “coming days to enhance liquidity and monetary reserves of foreign currency” of Pakistan.
In October, Saudi Arabia said it would loan Pakistan $6 billion and staunch ally China has also pledged to help but not announced the size of any assistance package. Islamabad is also engaged in bailout talks with the International Monetary Fund.
“Stocks closed flat amid higher trades on late session recovery after the UAE announcement to deposit $3 billion to support monetary imbalances and improve foreign exchange reserves," equity analyst Ahsan Mehanti said. "Investor concerns, foreign outflows and uncertainty in global equities invited mid session pressure."
The benchmark KSE 100 Index closed the weekend session at 38,251 points with a gain of 15 points. Volumes declined slightly from 136.7 million shares to 130.3 million but trade value increased by 29 percent to reach $48.3million.
“The market oscillated between +251 points and -391 points that included first session ending in red," said Misha Zahid, an equity analyst at Arif Habib Limited said. "However, the start of second session saw robust buying activity on the back of news that UAE is contributing $3 billion to Pakistan."
On a weekly basis the market remained range bound and ended down by 0.87 percent.
“It was a dull week for the benchmark index, where negative sentiments persisted," said Nabeel Khursheed, a stock market analyst at Topline Securities. "Investors preferred to remain on the back foot due to the bleak economic outlook and expected poor corporate earnings for the coming year. Even the announcement by the UAE towards end of the week to deposit $3 billion SBP, was unable to alter dreary outlook."
But UAE’s announcement eased some pressure in the currency market.
“At the time of dwindling foreign exchange reserves and increasing trade deficit the news has been taken by the market as a very positive gesture,” said Malik Bostan, the President of the Forex Association of Pakistan.
He said following the news, the Pakistani rupee strengthened by one rupee against the US dollar in the open market to 139.77 rupees as compared to the previous day’s closing.
Economists believe the inflow from the UAE will have a "partially positive" impact on the economic situation of the country.
“This will have a positive impact on reserves; our balance of payment deficit will decline by $3 billion but this is not going to last long," said economist Dr. Bilal Ahmed. "For long term sustainability, the government will have to create another positive action."