JS Securities Limited - JS Research.

Karachi -- February 01, 2023 (PPI-OT)

Jan-2023: PSX oscillates on IMF talks

PSX recoups losses on progress with IMF

2023 kicked off with a roller coaster ride, with developments regarding IMF's ninth review and changing political landscape being focal points. After a range-bound first half of Jan, a sharp correction (-2,078 points, -5.1%) amid back-to-back announcements to dissolve assemblies of two provinces (Punjab and KPK) invited bears for some days. The bourse however swiftly changed direction with news flows that indicated developments over pending government actions to resume the ninth IMF review and managed to recover almost all the losses posted during earlier. The KSE100 Index recorded a gain of 62bp (+253 points) this month.

Developments on FX inflows gradually unwrap

A positive surprise this month was Pakistan securing commitments worth ~US$10bn (~3% of GDP) at the International Conference on Climate Resilient Pakistan for rehabilitation of flood affected areas, covering for ~62% of the estimated US$16bn recovery needs estimate. The funds, however, would materialize in SBP's foreign exchange reserves gradually.

Announcement of additional funding and some roll overs from Saudi Arabia and UAE this month were also welcomed. The external account data point also remained encouraging, limiting C/A deficit to US$400mn again in Dec-2022 on continuing administrative controls over imports. That said, debt repayments took SBP reserves to 9-year low levels at US$3.6bn, bringing import cover down to a couple of weeks. Immediate progress on pending IMF review hence becomes need of the hour, to also unlock prospective fresh inflows from other lenders.

As government shows intent of macro adjustments

Among...