PSX Weekly review & outlook
DG ISI notified & Saudi Arab $4.2b ticked. IMF, next!
PSX - Weekly review & outlook
The market has started rebounding for sure. In a sharp correction since budget announcement, various reasons were attributable to the plunge. Be it Afghanistan war, Current Account deficit, Rupee depreciation, DG ISI notification & IMF talks. However, step by step worst seems to be behind us.
The sentiment-changing event was Saudi Arab's offer of an economic bailout. By handing over $3b in SBP deposits & $1.2b in Oil credit facility, Pakistan has secured some respite amid commodity upcycle.
This was a positive surprise and a condition of IMF's bailout as well. PM was on call with President Xi as well (hopefully we would see rollover again). For naysayers, this event was a turning point giving bulls a sigh of relief & opportunity to roar.
Immediately after the expectations of Saudi Arab's package, Rupee started to strengthen from Rs 175 to Rs 171 against the USD. Many participants unwound their positions understanding that Rupee is trading on upper range. This view was reinforced when REER for the month of September was reported at 95 as well.
With REER at 95 and Trade Deficit marginally improving, currency seems to be balanced in early Rs 170s range. This is good news for investors, importers & cyclical industries which were quick to reprice the uptick.
The political noise regarding DG ISI's notification was also toned down as PM picked the say nominee earlier notified by ISPR. Although the date of assuming the charge is three weeks later.
Creating another challenge on the streets for the govt was TLP protests in Punjab which caused a huddle of National Security Committee resolving to continue the talks but not at the extent of challenging the writ of the state. Any violence in Capital or nearby cities has the capacity to disrupt market momentum as Rangers have been called in for 2 months to deal with the issue.
To conclude, two events have been concluded on a not-so-bad note; DG ISI's notification & Saudi Arab's $4.2b economic assistance. Government seems confident in announcing a successful review of IMF talks as well that should give confidence to the market participants as Rupee's appreciation has already given a boost.
Next month's trade deficit numbers - if better than last month's - would add a catalyst to recently observed upward trend in the market. PM's decision to not pass on hike in Petrol/Diesel prices would support inflation numbers that might reduce the magnitude of monetary hike in November. Nonetheless, worrying factors seem to be behind us.