KARACHI: Political foot-dragging on the impending reversal of fuel and electricity subsidies recommended by the International Monetary Fund (IMF) cost stock investors a paper loss of more than Rs228 billion on Monday.

Share prices nosedived as investors expressed worries about the country’s debt repayment capacity amid depleting foreign exchange reserves.

As a result, the benchmark settled at 43,393.14 points, down 1,447.67 points or 3.23 per cent from the preceding close.

The trading volume increased 61.1pc to 305.2 million shares while the traded value went up 63.2pc to $49.2m on a day-on-day basis.

Speaking to Dawn, Arif Habib Ltd Head of Research Tahir Abbas said investors sold shares on a lack of clarity with respect to the resumption of the IMF programme. “We must resume the loan programme. Its prerequisites include ending the petroleum and electricity subsidies and the withdrawal of the amnesty extended by the last government for sick industrial units,” he said.

These prerequisites will follow the incorporation of other IMF recommendations into the 2022-23 budget. Friendly countries like Saudi Arabia and the United Arab Emirates have reportedly linked their economic relief packages to the resumption of the IMF programme. Only then will Pakistan be able to go to international capital markets for the issue of sukuk and bonds to further strengthen its dollar inflows, he said.

“Talks with the IMF will begin on May 18. The government must take a decision on the prerequisites before that. It can choose to do away with the subsidies either phase-wise or in one go. But it must decide at the earliest to save the stock market from further declines,” said Mr Abbas.

According to Faisal Shaji of Standard Capital Securities, Monday’s selling on the stock exchange reflected retail panic as individuals were the largest group of market players that offloaded shares worth $2.8m.

“Shares dropped as investors reacted to the latest trade deficit number,” he told Dawn. The gap between imports and exports widened to $39bn in July-April. “Dollars are depleting. Friendly countries aren’t extending help. The only way-out seems to be fresh elections,” he said.

Stocks contributing significantly to the traded volume included Lotte Chemical Pakistan Ltd (27m shares), Cnergyico PK Ltd (23.85m shares), WorldCall Telecom Ltd (20.97m shares), Telecard Ltd (11.49m shares) and Ghani Global Holdings Ltd (10.6m shares).

Sectors that took away the highest number of points from the benchmark index included commercial banking (305.05 points), cement (237.04 points), technology and communication (183.19 points), oil and gas exploration (130 points) and fertiliser (103.8 points).

Shares contributing most negatively to the index included Lucky Cement Ltd (118.22 points), Systems Ltd (109.91 points), Habib Bank Ltd (75.79 points), Meezan Bank Ltd (65.96 points) and TRG Pakistan Ltd (58.05 points).

Stocks that contributed most positively to the index included Murree Brewery Ltd (5.93 points), Lotte Chemical Pakistan Ltd (5.14 points), Shakarganj Ltd (4.2 points), Standard Chartered Bank Ltd (2.19 points) and Bank Alfalah Ltd (2.03 points).

Foreign investors were net sellers as they offloaded shares worth $0.18m.

Published in Dawn,May 10th, 2022