Pakistan's stocks surge 2,400 points after cliffhanger IMF deal

• Topline Securities  says today's gain likely to be highest in PSX history.
• At end of trading, PSX gained 2446.32 points and closed at 43,899 points.
• Analysts pin rally on IMF deal. 

KARACHI: Pakistan's stocks surged by a staggering 5.9% or 2,400 points on Monday, marking their biggest single-day upswing in 15 years, mainly cheering a cliffhanger deal with the International Monetary Fund (IMF).

Pakistan Stock Exchange's (PSX) benchmark, KSE-100 Index remained on the roll until the trading was halted for an hour after the market hit its upper circuit limit of 5% at around 9:30am. The trading resumed at around 10:37pm.

Topline Securities in a tweet said in points terms the increase was even more significant.

"Today's gain in the benchmark KSE 100 Index will likely to be highest in the history of Pakistan Stock exchange," it said.

When the market opened today, after Eid holidays break, it surged a record 2,231.1 points to 43,683.78 points, rising more than 5%, which forced the suspension.

As the trading resumed after an hour's suspension, the benchmark index surged to 43,923.71 points — an increase of 5.96% or 2471.03 points — at around 11:20am.

At the close of the trading, the market had gained 2446.32 points — an increase of 5.9% — and closed at 43,899 points.

Pakistan secured a badly-needed $3 billion short-term financial package — subject to approval by the IMF board in mid-July — on Friday, giving the South Asian economy a much-awaited respite as it teeters on the brink of default.

Speaking to Geo.tv, Pakistan-Kuwait Head of Research Samiullah Tariq said the market is performing due to the IMF deal and the reduction of the uncertainty on the balance of payments front.

The loan is a lifeline for Pakistan as it gives a nine-month roadmap to the nation, which is facing one of its worst economic and political crises on record.

Arif Habib Limited's Head of Research Tahir Abbas also pinned the rally on the staff-level agreement with the IMF.

When asked whether the rally would be short-lived, Abbas said: "No, the momentum and sentiment are very positive as now the country has an economic roadmap ahead for the next nine months."

The KSE-100 index had become the world's cheapest equity benchmark, according to Bloomberg, as concerns regarding political turmoil and a risk of default had sent investors fleeing.

However, there was a growing interest in Pakistani eurobonds maturing in 2024 and 2025, with limited indicative offers from any sellers.

Among key stocks to advance, automakers rose by between 6% and 7.5% on expectations that import restrictions on car parts would be lifted under the IMF deal.

Several automakers including Pakistan Suzuki Motor Co had announced prolonged plant closures in 2023, citing import restrictions.

Honda Atlas Cars (Pakistan) and Pakistan Suzuki shares rose 7.5% to hit the upper limits of trading bands, while Indus Motor Co, which markets Toyota cars in the country, gained 4.2%.

"Auto sector stocks were trading at cheap valuations," said Muhammad Iqbal Jawaid, an investment analyst at Arif Habib Ltd. "With the import ban lifted and a $3.0 billion IMF deal secured, companies such as PSMC, INDU and HCAR will not face any issues in their respective supply chains."

"All the necessary parts required for the assembly of vehicles will be available on time," the analyst added.

Islamabad also faces a payment of $23 billion in external debt obligations during the fiscal year, which started in July — and is almost six times more than the State Bank of Pakistan's $4 billion forex reserves.

PM felicitates business community

In response to the surge, Prime Minister Shehbaz Sharif felicitated the business community and the nation.

He said as a result of a staff-level agreement with the IMF, the trust of investors and the business community was rapidly reviving.

In a statement issued by the PM Office, Shehbaz said the government's continued struggle and prudent policies had started bearing fruits as signs of the country's economic revival were rising.

"We are resuming the journey of economic development and decline in the inflation rate from the point where Quaid Muhammad Nawaz Sharif had left," he said.

"Thanks to God, the country has been put on the path of development again, he said adding that after severe disappointments, a new sun of hope is rising again."