PSX gains 615 points on IMF hopes, year-end buying

KARACHI: Shares at the Pakistan Stock Exchange (PSX) continued to rally on Friday, with analysts attributing the uptrend to year-end buying and expectations of completion of the International Monetary Fund’s (IMF) ninth review which would boost critically low foreign exchange reserves.

The benchmark KSE-100 index jumped 614.7 points, or 1.55 per cent, to reach 40,362.09 points at 2:58pm. Head of Equity at Intermarket Securities Raza Jafri noted that the government has “belatedly started to comply with IMF conditions, going by the removal of import curbs and reduction in concessionary loans”.

“The market may be taking heart from this,” he said, adding that the element of year-end window dressing could also be at play. Fund managers use the window dressing strategy — selling shares with big losses and buying ones with large gains — to improve a fund’s performance before presenting it to their clients.

Three other analysts also attributed the stock market’s rise to year-end buying among other reasons. “The primary reason is year-end buying. Institutions buy shares to improve balance sheets,” commented Aba Ali Habib Securities’ Salman Naqvi commented. He said the market also expected the IMF’s ninth review to be completed at the start of the next year, which would unlock inflows from bilateral countries and multilateral lenders in a much-needed boost to Pakistan’s foreign reserves.

“If the review is completed, the chances of default will reduce as countries such as China, Saudi Arabia and the UAE and multilateral lenders such as the World Bank will provide aid and the [economic] situation will improve. “Shares are available at low rates and investors have been on a buying spree,” he added.

First National Equities Limited Director Amir Shehzad said that while fund managers buying shares to improve their portfolios had led to the index’s uptrend, the major contribution was by the oil and gas sector’s rise following the government’s plans to settle circular debt.

Dalal Securities CEO Siddique Dalal also noted the oil sector’s good performance, saying that Pakistan Petroleum Ltd (PPL) shares were up Rs4.75 or 7.49pc at 2:58pm.

Meanwhile, Oil and Gas Development Company Ltd (OGDCL) shares gained Rs3.59 or 4.7pc. “One reason for the stock market’s rise is year-end buying. Secondly, the oil sector has gained because of expectations the government will end circular debt next year,” Dalal said.

However, he cautioned the current uptrend was simply a “temporary technical correction” and would not sustain because economic fundamentals had not improved and political instability still remained.