Analysts foresee signs of economic revival unfolding in crises-stricken Pakistan with positive sentiments in the equity and currency markets due to a renewed resolve of the newly-elected Pakistan Muslim League-Nawaz leadership to make Pakistan an “Asian Tiger”.
Continuing its record breaking spree on Tuesday, the stocks market rallied to cross the psychological barrier of 20,574.62 points during the second trading session in its reaction to Saturday’s election results that put PML-N chief Nawaz Sharif in the driving seat for the next five years.
“This is first indication of economic revival in Pakistan,” said an economic observer. Reacting positively to a one-party lead in the formation of federal government, the otherwise risk-averse equity investors at Karachi Stocks Exchange (KSE) made the benchmark KSE 100-share index gain 230 points or 1.17percent.
Amid increased trading volume, the intraday high hit the 20,503.85 points before dipping to the intraday low of 20,244.82.
The turnover ballooned to Rs 299.900 million from 280.274 million of Monday. The market capitalization crossed the Rs 5 trillion mark to stand at over Rs 5,000 trillion against Rs 4.954 trillion of the previous trading session.
Of total 379 scrips traded, the value of 164 appreciated, 196 depreciated and 19 remained unchanged. Accumulatively, the trading value dropped slightly Rs 9.7 billion compared to Rs 9.8 billion the market witnessed on last trading of the previous week. The free-float KSE-30 index also closed bullish at 15,739.29 points, gaining 222.18 points.
“Pakistan Stocks closed all time high led by oil and banking stocks after the PML-N chief pledged to boost Pakistan’s relations with the US and India,” said senior analyst Ahsen Mehanti.
The analyst said the bullish activity was witnessed in selected blue-chip stocks across the board after the PML-N chief’s statement for making Pakistan an “Asian Tiger” led the post election rally at KSE amid higher trades and consolidation.
“Renewed foreign interest, hopes for early resolution of circular debt crises in energy sector, gas supply issues to fertilizer and textile sectors on new political commitments played a catalyst role in the record close,” said Mehanti, who also is a director at Arif Habib Securities.
This, he said, was despite investors’ concerns for security unrest in the country with certain political parties protesting alleged rigging in the historic polls.
Another stocks analyst said the market Tuesday set another record to welcome the PML-N’s victory in elections.
The analysts at Topline Research said the PML-N’s manifesto, promising low interest rate scenario to provide level playing fields to local industry and low tax rates, was expected to bode well for the local capital markets.
“Expectation of improved energy position mainly in Punjab would keep textile, cement and other industries’ profitability on the higher side,” said Topline analyst Abdul Azeem. The experts at the currency market also are upbeat that led by twice-PM Nawaz Sharif the new government would put the weakening Pak rupee back on track.
The rupee at present is trading, on the open market, against US dollar at Rs 99.98 on average. According to Malik Bostan, President Exchange Companies Association of Pakistan (ECAP), this trend was not worrisome given the country’s fast depleting dollar reserves that have shrunk to $12 billion.
The rupee-dollar parity on the inter-bank market stands at Rs 98.40. “The inter-bank rate in fact determines the value of rupee on the open currency market,” said Bostan who believes that Sharif-led government would replicate the 2008-like performance to stabilize economy.
“If he is able to materialize his economic strategy there is no doubt that rupee can appreciate to come in tandem with Indian currency which traded at Rs 55 versus the greenback,” he said.
Post Chaghi nuclear blasts in 2008, the currency dealer recalled, then PM Nawaz Sharif had kept the rupee-dollar parity intact at Rs 54 while Pakistan was left with only Rs 400 million foreign exchange reserves.
“The country’s foreign currency account then had seen an inflow of $11 billion unlike today’s $3 billion only,” the money exchanger said.
The ECAP chief, however, expressed concern over the prevailing uncertainty with political parties blaming each other for poll rigging and refusing to accept each other’s mandate. “This uncertainty still haunts sentiments at the currency market,” he warned.
“The strong government is expected to bring prosperity in the country,” said Topline analyst Abdul Azeem.
The State Bank Monday reported a 6.37 percent increase in the inflow of worker remittances that, during July-April FY13, stood at $11.569 billion. The State Bank believes that remittances would grow up to a record $ 14 billion this fiscal year ending on June 30. Then there are positives like Monday’s statement of the Standards & Poor, the globally acclaimed credit rating agency, that the smooth democratic transition in Pakistan may stabilize credit quality of the country.
The IMF and Washington have already agreed in principle to release around $5 billion and $1.8 billion, respectively, on account of an extended SBA facility and Coalition Support Fund (CSF).
The release of cash, however, was awaiting an elected government in Islamabad as the international financers had refused to strike a deal with the caretaker regime.
Meanwhile, the Pakistan Federation of Chambers of Commerce and Industry (FPCCI), the country’s apex body of the trade and industry, expressed the hope the new government would start efforts for revival of the economy soon. “The incoming government would be having good finance managers who would be able to overcome the burning issues of energy crises, dwindling dollar reserves, high cost of doing business, healthcare facilities and education in all the provinces of Pakistan,” said President FPCCI Zubair Ahmed Malik.
If Nawaz is able to materialize his economic strategy, there is no doubt that the rupee can appreciate to come in tandem with Indian currency which traded at Rs 55 versus the greenback.
