PSX jumps past 45,000 mark after Pakistan receive $2b from S Arabia

KARACHI: Stocks at the Pakistan Stock Exchange (PSX) Tuesday soared jumping past the 45,000 mark for the first time in 14 months after the cash-strapped nation received $2 billion from Saudi Arabia.

The market rallied, adding over 500 points to the benchmark KSE-100 index during the intraday trade. At around 12:24pm, the index gained 555.18 points or 1.24% to jump to 45,140.30 points, up from the previous close of 44,585.12 points.

Fitch credit rating agency also Monday upgraded Pakistan’s long-term foreign currency issuer default rating to CCC from CCC-, a positive sign for a country reeling under its worst economic crisis.

“Market optimism has been reinforced by the news of Saudi money, Fitch credit rating upgrade, and lack of any hindrance in the IMF talks with the political parties last weekend,” capital market expert Saad Ali told media.

The analyst also anticipated that the market would witness a rise in points throughout the week.

In a statement, the rating agency said the upgrade reflected the country’s improved external liquidity and funding conditions following a staff-level agreement with the International Monetary Fund (IMF), but warned that the fiscal deficit still remained wide.

The Saudi inflows came after Islamabad signed the short-term IMF deal on June 30 under a standby arrangement that will disburse $3 billion over a nine-month period, subject to approval by the IMF’s board, which is meeting on July 12.

Multilateral and bilateral funds were a major obstacle in the way of Pakistan’s deal with the IMF — which remained stalled for more than nine months and expired.

The SBA has now provided the nation with a breathing space, avoiding a sovereign default, and helped the government streamline fiscal policies.

Speaking to a news channel, Arif Habib Limited’s Head of Research Tahir Abbas said the market sentiment has been generally positive since the IMF deal, but today’s uptick can be attributed to the Saudi inflows.

“Tomorrow, the IMF board meeting will take place; Pakistan can receive up to $1.2 billion from the IMF; the market’s sentiment will remain positive in the coming days,” he said.

With sky-high inflation and foreign exchange reserves barely enough for a month of controlled imports, analysts say Pakistan’s economic crisis could have spiralled into a debt default in the absence of the IMF bailout.

With the IMF deal in place, Pakistan can now unlock other external financing.