Gains from Crown Prince’s arrival to dampen because of IMF | MG Opinion

February 15, 2019 (MLN): Pakistan’s capital markets are no different to other markets globally. Market’s performance is reliant on economic performance of the country.

After having two consecutive bad performances, this year capital market is expected to perform better as the present government has already taken widely considered decisive measures to put an economy on track.

Currently, all eyes are on Crown Prince Muhammad Bin Salman’s upcoming visit to Pakistan on 16th Feb, where more MoUs will be signed regarding further direct investments of worth US$15 bln in refining, renewable energy, petrochemical and minerals. However, this euphoria might dampen soon because of IMF.

Since stock markets can even absorb bad news and then again amalgamate but what really hurts the market is the uncertainty. With more clarity on IMF programme, initial market reaction is observed to be mixed given the statement of commitment from the IMF is tempered with hints of more difficult measures to be taken by the government on macroeconomic front.

The fund’s condition of reducing government borrowing from SBP, hike in electricity and gas prices and placement of  value-added tax (VAT) would keep the upside limited.

Additionally, in line with IMF perception interest rates are expected to hike further in CY19, making an avenue for the banking sector to perform well.

On the upside, the policy interventions by the government are bearing fruit, structural and policy changes resulting in improved key macroeconomic indicators, as the trade and remittances data showed improvement during FY19.

There are challenges but there are opportunities too, the analysts are hopeful that market will respond positively.

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