KARACHI: Local traders and analysts on Monday described Pakistan’s currency and stocks as global ‘top performers,’ saying they had recovered much of their value since the beginning of August after months of depressed trading against the backdrop of political and economic uncertainty in the country.
Pakistan’s main stock index rose by 764.25 points to close at 43,621 while the currency appreciated by 0.71 percent to close at Rs 213.98 against the US dollar in the interbank market on Monday.
The stocks and the Pakistani rupee have appreciated by 22 and 11 percent, respectively, during the ongoing month in a consistently bullish spell.
“After months of economic and political uncertainty, the rupee and stock market have emerged as top performers in August so far, beating all other countries,” Muhammad Sohail, chief executive officer of Topline Securities, a Karachi-based brokerage firm, said while referring to Bloomberg data. “The rupee is up 11 percent while KSE100 Index has surged by 22 percent in dollar terms.”
The rupee has appreciated by 11.58 percent, or Rs25.97, against the greenback in the last ten trading sessions that remained bullish.
Prior to that, Pakistan’s national currency lost its value by 17.51 percent since January due to economic concerns related to the revival of the support program of the International Monetary Fund (IMF) and the political situation that led to the ouster of former prime Minister Imran Khan in April.
The recent appreciation of the rupee is mainly due to the revival of the IMF program after Pakistani authorities and officials of the global lending agency reached a staff-level agreement for the seventh and eighth review of the loan program on July 13.
The agreement has paved the way for the disbursement of $1.2 billion by the IMF at the end of August after the approval of its executive board.
Pakistan is also expected to get some financial assistance from friendly countries, including Saudi Arabia and the United Arab Emirates (UAE), which is desperately required to bridge the financing gap recently mentioned by senior IMF officials.
These developments have also had a positive impact on the country’s equity market which had a bullish close on Monday, said analysts.
“The bullish market sentiment owes to the strengthening of the national currency along with the IMF’s letter of intent for the revival of the bailout program,” Ahsan Mehanti, chief executive officer of Arif Habib Corporation, said. “Reports of additional financial support from Saudi Arabia after the finance minister hinted at $1 billion UAE investment through Pakistan Stock Exchange [PSX] have also helped the situation.”
He added that other factors that benefitted the market included a positive sentiment in global equities and renewed foreign interest in PSX ahead of the IMF bailout receipt expected this month.
Pakistani analysts expect the rupee to stabilize between Rs200 and Rs210 against the US dollar.
“The Pakistani rupee was undervalued against the greenback which is expected to stabilize at around Rs210 after recent prospects of inflows from the IMF and friendly countries,” Samiullah Tariq, director research at the Pakistan-Kuwait Investment Company, told Arab News.
However, currency dealers said the rupee was likely to find support somewhere around Rs200 after the revival of the IMF program and expected import cuts.
“The rupee was depreciating due to the uncertainties surrounding the IMF program, though the fundamentals were sound and now the national currency is appreciating on mere promises since we have not received the funds so far,” Zafar Sultan Paracha, general secretary of the Exchange Companies Association of Pakistan (ECAP), said.
“The pressure on the Pak rupee will further ease off in the coming days due to the reduction in global commodity prices, including oil and other energy products along with freight cost cuts,” he added.
Fitch Ratings in its latest Economics Dashboard released on Monday said global supply chain disruptions were beginning to unwind as shipping rates were gradually declining while the time taken to deliver goods was also falling quickly.
It added that port congestion had eased and the backlog of orders was getting cleared, raising the prospect of lower core goods inflation ahead.
“The cost of shipping freight has declined by as much as 70 percent on some routes since September 2021 while transporting cargo now takes around 90 days instead of 122 days in April 2022,” the international rating agency said. “Congestion at US ports has dropped significantly, falling by close to 80 percent since last November.”