Pakistan stocks snap back amid Saudi funding bets

• Stocks draw strength from govt resolve to end circular debt.
  
• Expectations of funding from friends boost investor sentiment.
  
• Hopes pinned on donor conference as FX reserves fall further.

Stocks Thursday wriggled out of a day-old bear hug betting on inflows from friendly countries, especially Saudi Arabia, amid market buzz the government has decided to deal a serious blow to the monster of circular debt, traders said.

The Pakistan Stock Exchange's (PSX) benchmark KSE 100-share Index gained 177.44 points or 0.44% to close at 40,716.76 points.

Minister for Finance and Revenue Senator Ishaq Dar said Wednesday he sees Saudi Arabia beefing up its deposits in Pakistan "within a matter of days, not weeks".

The statement comes as a default risk looms over Pakistan, the rupee continues to depreciate against the US dollar, and forex reserves have plunged to record lows — covering merely a month's imports.

Financial pundits, voicing concerns since the ouster of the previous government, say the country's financial side will remain vulnerable until there is political stability.

Topline Securities said equities had a positive day with low volumes. “The cautious market behaviour can be attributed to the expectation regarding some breakthrough on the circular debt front, confirmation of funds flow from friendly countries and donor conference (scheduled on Jan 9, 2023),” the brokerage said.

The State Bank of Pakistan (SBP)-held foreign exchange reserves fell further as the country paid external debts amid a severe economic crisis.

During the week ended on December 30, 2022, the central bank's forex reserves fell $245 million to $5.57 billion, a statement from the central bank said Thursday, down from last week's reserves of $5.821 billion.

The net foreign reserves held by commercial banks amount to $5.84 billion, with the total reserves clocking in at $11.42 billion, the statement mentioned.

The reserves, which hit their lowest level since April 2014, will now only provide import cover of 1.06 months, as the country tries to lessen imports amid the greenback shortage.

During the day, Engro Corporation, Pakistan Services Limited, System Limited, Pakistan Petroleum Ltd, and Oil and Gas Development Company, contributed 187 points to the index, while Indus Motor Company, Meezan Bank Limited, and Nestle Pakistan lost 32 points, collectively, to profit-taking.

Brokerage Arif Habib Ltd said another range-bound session was recorded at the PSX. “The benchmark index opened in the green and made an intraday high of 251.44 points and traded in the narrow range throughout the trading session,” it reported.

The prevailing political and economic uncertainty kept the investors at bay as volumes in the mainboard declined considerably while 3rd tier stocks continued to dominate the volume board.

Sectors contributing to the performance included fertiliser (+68.9 points), miscellaneous (+55.9 points), E&P’s (+54.4 points), technology & communication (+31.7 points), and investment banks/investment companies/securities companies (+8.6 points). K-Electric was the volume leader with 18.615 million shares.

Out of 308 companies active in the session, 124 closed in green, 161 in red and 23 remained unchanged.

The National Security Committee (NSC) earlier this week agreed on undertaking concrete steps — including import rationalisation as well as preventing illegal currency outflows and hawala business — in order to strengthen the economy.

Amid a crisis-like situation, Pakistan will have to repay approximately $8.3 billion in the shape of external debt servicing over the next three months (Jan-March) of the current fiscal year.

The government is eyeing to pass the ninth review of the International Monetary Fund (IMF) to secure a $1.7 billion bailout package, but both sides have made no substantial headway in recent days.

In this regard, FinMin Dar said that despite an uphill task, the country would meet its international obligations and not default.