KARACHI: A lack of clarity over economic reforms and uncertainty about the tenure of the newly formed government took a toll on the shares markets in the first half of the outgoing week.

However, investors took comfort following reports about the coalition government staying intact for at least a couple of months. This helped put a stop to a further decline in share prices, according to JS Global.

As a result, the benchmark index of the Pakistan Stock Exchange closed the week down 1,354 points or three per cent at 43,486 points.

Negative sentiments were supported by consistent depreciation as the rupee sank to its all-time low of 193, down 8.5pc since the beginning of 2022.

According to AKD Securities, major reasons for the drop in stock prices in the outgoing week were political uncertainty and the government’s indecisiveness over the prerequisites listed by the International Monetary Fund (IMF) for the resumption of its loan programme. The government’s procrastination has put Pakistan’s economic situation into a tailspin, causing risk-averse behaviour among investors, it said.

The erosion in foreign exchange reserves also continued in the outgoing week with the central bank’s reserves declining to $10.3 billion, signifying an import cover of about 1.5 months.

Other important news stories during the outgoing week included the US secretary of state inviting Pakistan’s foreign minister to a meeting in New York, 10-month trade deficit widening by 65pc year-on-year to $39.3bn, Pakistan reporting its first case of the Omicron sub-variant, Saudi Arabia linking its $3bn additional deposits with the revival of the IMF programme, Roshan Digital Account (RDA) flows hitting the $4.2bn mark, National Savings Schemes increasing profit rates by 0.96-3pc, cement sales going down 28pc in April and auto sales dropping 18pc last month.

Engineering and cement sectors posted largest declines of 6.1pc and 5.9pc, respectively, owing to concerns over a potential slowdown in demand and margin shrinkage.

Major net selling was recorded by individuals ($10.4 million) and mutual funds ($3.2m). On the other hand, banks absorbed most of the selling with a net buy of $16.3m.

Stock-wise, top performers included Habib Metro Modarba (25.7pc), Service Industries Textiles Ltd (17pc), Shakarganj Ltd (9.6pc), Colgate-Palmolive Pakistan Ltd (8.1pc) and Pakistan Services Ltd (8.1pc). Top laggards were Millat Tractors Ltd (14.4pc), Pak Elektron Ltd (11.1pc), Avanceon Ltd (10.2pc), Cnergyico PK Ltd (10.1pc) and Azgard Nine Ltd (9.9pc).

“The market will remain choppy going forward as a host of economic challenges weigh in on the investor sentiments. Some respite may be provided if the fuel prices are unfrozen, which will help the government in its parleys with the IMF,” said the brokerage.

However, the downside of the same will be a spiralling inflation that will likely cross 15pc in coming months, it added.

Published in Dawn, May 15th, 2022