Stocks slide as market fears sustained interest rates in the coming months
Business
The promises made by newly-appointed finance minister about IMF talks fail to boost confidence
KARACHI (Web Desk) – The high interest rates which have crippled Pakistan’s economy again dominated the market sentiments, as the benchmark KSE-100 Index tumbled 1.16 per cent on Wednesday, replicating the losses suffered in the previous session.
The State Bank of Pakistan’s Monetary Policy Committee is scheduled to meet next week and review the rates. But the rising inflation in Pakistan coupled with the US Federal Reserve delaying the possible rate cuts at least until June for the similar reasons means that borrowing costs won’t be reduced in the coming months.
Following the 1.45pc loss a day earlier, the Pakistan Stock Exchange (PSX) again witnessed selling pressure with the KSE-100 Index closed at 64,048.44 after shedding 753.26 points, showing that the promises to engage the International Monetary Fund (IMF) for longer period and bringing macroeconomic stability can’t boost the investors’ confidence.
During the previous months, especially in the last months of 2023, the domestic investors had boosted the stocks after property prices slumped amid rising inflation and record-high interest rates, as they rushed to the PSX to make some quick money.
This trend coincided with the announcements made about massive foreign direct investment (FDI) from the Gulf States – especially Saudi Arabia and the United Arab Emirates (UAE) – boosting the hopes that the money will help the energy companies involved in oil and gas business.
In fact, the success in ensuring the release of the remaining $1.1 billion under the current Stand-By Arrangement (SBA) after the upcoming review and seeking another deal with the IMF could further dampen the market sentiments given that the caretaker government during the last days of its tenure went for gas price hike, directly affecting the some industries involved in exports and the fertilizer producers.
With the possibility of Islamabad going all-out to meet the IMF conditions to get another bailout programme, any further rise in cost of doing business increasing the energy tariffs will negate any benefits obtained through privatisation of lossmaking state-owned enterprises.
On the other hand, the selection of Muhammad Aurangzeb of finance minister instead of Ishaq Dar has closed one chapter: there is no possibility of any government intervention to boost the Pakistan rupee.
However, a weakened rupee at the mercy of market factors also translates into a fact that the imports will remain expensive and the cost of doing business isn’t going to see any reduction in foreseeable future.
