KARACHI: Pakistan equities closed bullish on Monday amid upbeat data on a falling trade deficit and strong rupee recovery ahead of the first review of a $3 billion International Monetary Fund (IMF) bailout agreement signed earlier this year, equity experts said.

The KSE-100 index of the Pakistan Stock Exchange (PSX) closed the trading session with a gain of 394 points at 46,627.08. Analysts said the bullish sentiment was fueled by a weekend cut in petroleum prices and an over 48 percent decrease in the trade deficit ahead of the next IMF program review, expected in the last week of this month when the lender’s team arrives in Pakistan.

Pakistan and the IMF struck a staff-level agreement for the provision of $3 billion in bailout funds under a stand-by arrangement (SBA) earlier this year, giving the South Asian economy a much-awaited respite as it teetered on the brink of default.

“Stocks closed bullish amid upbeat data on the trade deficit falling by 48.2 percent in September 2023 ahead of IMF review meetings this month for the release of the next support tranche as well as an upbeat growth outlook,” Ahsan Mehanti, CEO of Arib Habib Corporation, told Arab News.

Pakistan’s trade deficit was down by 48.2 percent year-on-year to $1.5 billion during September 2023. Exports stood at $2.5 billion, up by 1 percent on an annual basis and 4 percent on a month-on-month basis while imports were recorded at $3.9 billion, down 25 percent on an annual and 13 percent on a month-on-month basis, according to the Pakistan Bureau of Statistics (PBS).

The bullish sentiments were also fueled by the government slashing the prices of petrol and high-speed diesel (HSD) by Rs8 per liter and Rs11 per liter respectively last week as part of its fortnightly price adjustment mechanism.

Yousuf Muhammad Farooq, director research at Chase Securities, said he was confident the review meetings with the IMF would go “smoothly.”

“Apparently, Pakistan has complied with major SBA conditions except the gas tariff, and hopefully that will also be done,” Farooq told Arab News. “The IMF review should go on smoothly.” 

Mehanti at Arif Habib attributed the bullish sentiments to upbeat data on the strong rupee recovery as well as agriculture and industrial productions. 

“Strong rupee recovery and government’s deliberations on privatization of SOEs (State-Owned enterprises) played a catalyst role in the bullish close of the bourse.” 

The rupee further strengthened against the United States Dollar by 0.34 percent to Rs286.76 in the interbank market on Monday and by 0.7 percent to Rs286 in the open market for selling.

The stock and currency markets were bullish despite higher inflation numbers released by the government on Monday, which said inflation rose to 31.4 percent year-on-year in September from 27.4 percent in August. The higher inflation was fueled by the rise in the price of petroleum products which had hit a historic high of Rs331.38 and Rs329.18 per liter for petrol and diesel, respectively, before being cut last weekend.

On an annual basis electricity charges have increased by 163.72 percent, textbooks 101.78 percent and gas charges 62.82 percent, among other nonfood commodities and services rate hikes, according to the statistics bureau.

Pakistani analysts expect the inflation rate will cool down in the first quarter of next year due to the improving value of the rupee against the greenback and the current account deficit. 

On a month-on-month basis, inflation climbed 2 percent in September, compared to an increase of 1.7 percent in August. 

Reforms required by the IMF bailout, including an easing of import restrictions and a demand that subsidies be removed, have already fueled annual inflation, which rose to a record 38.0 percent in May.

Interest rates have also risen to their highest at 22 percent, and the rupee hit all-time lows in August before recovering in September to become the best performing currency following a clampdown by authorities on unregulated FX trade.

On Friday, the ministry of finance said in its monthly report that it anticipated inflation remaining high in the coming month, hovering around 29-31 percent due to an upward adjustment in energy tariffs and a major increase in fuel prices.

The report added that inflation was, however, expected to ease, especially from the second half of the current fiscal year that starts on Jan. 1.