- No major triggers to lift investors’ sentiments
- Risk of further inflation as a further increase in gas and electricity tariff expected
KSE-100 index broke its five-week bearish trend and closed the last week with an increase of 225 points. Market activity remained weak as Average volume traded for KSE-100 stood at 59 million marking limited activity at the bourse.
Investors remained optimist over positive developments on the macro front including a contraction in monthly Current Account Deficit (decline of 73%YoY) and an expected inflow of US$2.1 Billion from China.
Macro – Economic Factors impacting Market Performance
Investors’ sentiment is expected to remain dull as macro economic challenges are aggravating.
Risk of further inflationary pressure in coming days is more obvious as a further increase in gas and electricity tariffs are expected.
Furthermore, Fiscal constraints and likely implementation of flexible exchange rate policy are expected to keep investors activity limited. State Bank of Pakistan Governor Tariq Bajwa has reiterated calibrated monetary policy stance, primarily aimed at taming inflationary pressures.
Gas distribution companies (SSGC & SNGP) have asked for a 145% increase in gas tariff from July 1st to avoid accumulation of losses. Furthermore, the IMF and Pakistan are yet to decide the timeline on the bailout deal.
As an additional challenge, Asian Development Bank has linked Pakistan’s request for $500mn programme loan with No Objection Certificate from IMF.