Syed Faraz Equities’ Post

KARACHI: Turbulence and uncertainty marred the outgoing week at Pakistan Stock Exchange (PSX), as the market underwent a bearish spell by closing four out of five sessions in the red. Uncertainty about securing a new, longer-term loan package in negotiations with the International Monetary Fund (IMF) kept the KSE-100 index under constant pressure. The week kicked off on a sour note due to mounting selling pressure in selective stocks and a weak economic outlook, which kept investors at bay on Monday. The KSE-100 index fell sharply on Tuesday, losing over 950 points with multiple factors including the weak rupee, monetary policy uncertainty, high inflation and the imminent IMF review denting investor sentiment. The upcoming monetary policy announcement deterred investors, who otherwise had positive hopes from the IMF review under its $3 billion standby arrangement (SBA), which fuelled the bearish mood and the index dropped another 750 points on Wednesday. The market rebounded on Thursday, soaring over 1,000 points as investor confidence returned over finance ministry’s assurance of Pakistan being in a good shape to successfully complete the SBA and secure a longer-term loan programme. However, the trend reversed in the following session when investors opted to book profits and stood on sidelines over economic concerns. With all the gloom, the benchmark KSE-100 index lost 977 points, or 1.5% week-on-week (WoW), and settled at 64,816. JS Research analyst Shagufta Irshad, in her report, stated that the stock market experienced high volatility throughout the week, resulting in negative close for four out of five trading days. Read: PSX slumps on rate, IMF review uncertainty Average traded volumes contracted 20% WoW, which depicted a reduced market activity as Ramazan began, she added. New cabinet ministers taking charge of their offices and subsequent arrival of an IMF delegation for final review of the $3 billion SBA were the key highlights of the week. The newly elected government remained quite firm about meeting all the structural benchmarks, quantitative and indicative targets set by the IMF. The IMF team reportedly expressed some concern about the government’s forthcoming strategies to address the anticipated revenue shortfall in 4QFY24 and reduce the circular debt in the energy sector. It is noteworthy that the review report will be submitted to the IMF executive committee by the second week of April for approval of a $1.1 billion tranche. On the macroeconomic front, cut-off yields on Pakistan Investment Bonds (PIBs) remained unchanged compared to the previous auction, with three, five and 10-year yields standing at 16.8%, 15.5% and 14.35%, respectively. Moreover, the State Bank’s reserves remained stable at $7.9 billion, the JS analyst added. Arif Habib Limited (AHL) wrote in its report that the stock market remained under pressure throughout the week, primarily due to divided opinions about the upcoming monetary policy,

The equity market has returned 8.6% just during the month of April amid positive sentiment. The finance minister has indicated that Pakistan should be able to secure an EFF with the IMF by June end, while rate cut expectations are strong in the MPS announcement on Monday. The KSE100 index has reached an all-time high of 72,743 points. During 2024 so far, the index has experienced a notable increase of 16.5%, equivalent to 10,292 points.

Pakistan Equity Market Outlook 2024   Friday, December 22, 2023 Pakistan Equity Market Outlook 2024: Economic Tailwinds to Fuel Bullish Sentiment   *In 2024, Focus to remain on Economic Recovery, Fiscal Discipline and Political Stability*: In our view, focus is likely to remain on new IMF Program, Economic Recovery and Political Stability. Elections to be held on 08-Feb-24 which would lead to stability on political front whereas slowdown in inflation is likely to keep interest rate reversal in limelight. We expect interest rates to start coming down from 2QCY24. *Expecting 700bps cut in Policy Rate*: We expect total 700bps cut in Policy rate to stand at 15% by end of 2024. We estimate inflation to average 24.4% in FY24 and continue its declining trend in FY25. We estimate PKR to average 298/USD in FY24 and FX reserves to stand at US$ 14.8bn as at Jun-24. We forecast GDP growth at 2.7% in FY24 against negative 0.2% in FY23. C/a deficit is expected to settle at 1% of GDP while Fiscal deficit is likely to be at 7% of GDP. *Eyeing an Index Target of 78,000*: For 2024, our target for the index is 78,000. This would represent a total return of approximately 31% from its current level of ~65,200. Our target is based on a market price-to-earnings multiple approach. At our target, the market would trade at a forward price-to-earnings ratio of 5.0x, which is below its long-term historical average of 7.7x but higher than current ratio of 4.6x. *Top Picks*: First half of 2024 is likely to be focused on interest rate reversal, elections and conclusion and signing of new IMF program. Considering energy sector reforms for resolution of circular debt, we prefer PPL, OGDC and PSO. Among cyclical and growth based companies we prefer MARI, FABL, MCB, UBL, LUCK, FCCL, HUBC, FFC, INDU and ILP. Link: https://lnkd.in/dfJbftd2 *IGI Securities (BRP-009)* *UAN:* +92 21 111 234 234 Ext: 974 | *Fax:* +92 21 35301726 *Website:* https://lnkd.in/dS96yquG *Address:* 7th Floor, The Forum, Suite No. 701-713, Block-9, Clifton, Karachi-75600, Pakistan #igisecurities #research #investorkit #psx #stockmarket #igiresearch #igitaly

IMF Deputy Managing Director Antoinette Sayeh sounds hopeful and advised the authorities to widened the reforms. The fiscal deficit is being contained, reflecting positive performance in both revenue and expenses, which needs on continual bases. It is also recommended to further step up to curb inflation. "There are now tentative signs of activity picking-up and external pressures easing. Continued strong ownership remains critical to ensure the current momentum and stabilization of Pakistan’s economy becomes entrenched," said the deputy MD who was also the chair of the board meeting that approved the release of $700 million, totaling the amount to nearly $1.9 billion. IMF forecasts 2% growth in the ongoing fiscal year, inflation to decline to 18.5% and the current account deficit may increase to around 1.5% of GDP. The forex reserves held by the State Bank of Pakistan (SBP), as of January 5, stand at $8.1 billion, while the country’s total reserves have reached $13.2 billion after a debt of $66 million was repaid. With the addition of the latest tranche, Pakistan’s forex reserves will reach a six-month-high as on July 14, the SBP reserves were around $8.73 billion.

The Monetary Policy Committee (MPC) decided to keep the policy rate unchanged at 22 percent in its meeting today. The MPC noted that while inflation is coming down as expected, it is still high. The MPC also factored in recent rising trend in global commodity prices amidst ongoing geopolitical events, and the potential implications of upcoming budgetary measures for the inflation outlook. On balance, the Committee stressed on continuation of the current monetary policy stance, with significant positive real interest rates, to bring inflation down to the target range of 5 – 7 percent by September 2025. https://lnkd.in/dYjbEexw #SBPMonetaryPolicy

📊🇬🇧 GBPUSD Daily Analysis: 📈💡 The UK economy's cooling trend persists, as evidenced by today's PMI readings, which indicate a slowdown in both the manufacturing and services sectors. The Manufacturing PMI has eased to 42.5 in August, a decline from 45.3 and falling short of the consensus estimate of 42.5. The Services PMI has been disappointing, entering contraction territory with a reading of 48.7. This marks a decline from July's reading of 51.5 and falls below the estimate of 50.8. 📉📈 Earlier, GBP/USD witnessed a decline of over 100 basis points, but these losses have since been recuperated. Additionally, the DXY index has surpassed expectations, showing a higher position. 📊📉 Technically, a bearish head & shoulders pattern is evident, with the neckline already broken. Should we witness a bearish confirmation after retesting, this could signal a potential sell opportunity. 📚💰 Please note that this content is shared for educational purposes and is not intended as financial advice. ⚠️⚖️ As always, trading carries risks. If you're considering trading, remember to manage your risk effectively. Wishing you successful trading and enriching learning! 📚📊🚀

"Impact of the Federal Reserve's Policy Pivot on Indian Bonds and Rupee: Key Insights" Here's a summary of key points: 1. Fed's Interest Rate Decision: The US Federal Reserve held interest rates steady at 5.25-5.50%, the highest since 2001, for the third consecutive meeting. They also projected three rate cuts for the next year. 2. Impact on US and Indian Yields: Following the Fed's decision, the yield on the US 10-year treasury dropped to 4.04%. In India, the yield on the 10-year benchmark bond fell to 7.2%. The drop in Indian bond yields was moderate compared to the US Treasury. 3. Foreign Portfolio Investment: Analysts expect a 300 basis point spread between US treasury yields and Indian government bond yields by December 2024, attracting foreign portfolio investment. This spread is seen as lucrative for foreign fund inflow. 4. Foreign Fund Inflows: While the inflow magnitude might not match the levels of October and November, the inclusion of Indian bonds in JPMorgan’s emerging markets bond index is anticipated to bring significant overseas funds, estimated between $20-25 billion. 5. Rupee Stability and Outlook: The Indian rupee has been stable, with expectations to remain within a range of Rs 83-83.40 for the next year. The dollar index, which fell to below 103 post the FOMC statement, is a crucial factor influencing the rupee. 6. Future Projections: In the next 3-6 months, analysts project the rupee to be around 83-84 levels, depending on various risks and market reactions. The Reserve Bank of India's comfort with letting the rupee adjust to market fundamentals will also play a role. Overall, the Fed's pivot signals a positive outlook for Indian bonds and a stable range for the rupee, with foreign fund inflows expected to bolster the Indian government securities market.

The #SBP has made right decision. Today’s no change in #policyrate at 22% by MPC suggests that #inflation outlook is guiding #monetrypolicy, instead of argument of the debt burden on the government and economic slow down impact of high policy rate.   The SBP has exhibited this cautious approach in last two three meetings when MPC maintained the policy rate against expectations of the market. It must continue its non-adventurous monetary policy stance and keep basing policy rate decisions on inflation outlook, its primary mandate.

What does Fitch's downgrading US Credit Rating from AAA to AA+ means for Indian Economy? On Tuesday, the credit rating was downgraded by one notch, from AAA (the highest rating allowed) to AA+, mostly for the reasons indicated below.- 1.Rising debt - Since World War II, the US government's debt has been gradually increasing. It is presently at its greatest level. 2. A decline in governance standards is apparent from ongoing disputes over the debt ceiling and hurried decisions that affect the debt's ability to be repaid. 3. Possibility of a Recession - The economic challenges the country is facing, such as increasing inflation and a potential recession, might put further strain on the government's budget. This could have number of implications like Higher Borrowing Costs, Challenges in Raising Capital and increased volatility in the markets as witnessed worldwide the very next day where DJI fell by almost 1%, FTSE by 1.6%, DAX by 1.36%, NIKKEI by 2.3%, HANG SENG by 2.5% and NIFTY by 1%. The downgrade did not say anything new that the market does not know and so, the negative knee-jerk reaction will be short lived as it is an opportunity for some investors to book profits, leading to a possible pullback. It could also weaken the US currency impacting the Indian Rupee and other currencies in turn. As, this could strengthen the currencies of the Asian countries and can also lead to increase in the adoption of bilateral settlements in non-dollar currencies. On top of all this, global brokerage firm Morgan Stanley has upgraded Indian equities to ‘overweight’, while downgrading China to ‘equal-weight’. Are these the bells of warning to shaken the investor's confidence or time to build a position?

The Monetary Policy Committee (MPC) decided to maintain the policy rate at 22 percent in its meeting today. While the inflation trajectory has shifted slightly upward after the recent energy tariff adjustments and additional taxation measures, the MPC assessed the continuation of ongoing tight monetary policy stance as appropriate to bring inflation down to the medium-term target. The MPC assesses inflation to fall gradually during the first half of FY24, before falling below 20 percent in the second half. The moderate growth outlook for FY24, addressing of short-term external sector vulnerabilities post-IMF SBA, and lagged impact of accumulated monetary tightening so far, were major factors behind the MPC’s decision Read More: https://lnkd.in/gzXb7Jm8