Pressmediaofindia
Related Articles
26-02-2024
By SJA Jafri + Bureau Report + Agencies
KARACHI: Pakistan’s equity market responded positively to a power-sharing agreement between two major political parties this week, as the uncertainty surrounding the formation of a new government dissipated, making the stocks close the weekend trading session with a five percent gain on Friday.
The late Tuesday night agreement to form a coalition government at the center was negotiated between Bilawal Bhutto Zardari’s Pakistan Peoples Party (PPP) and the Pakistan Muslim League-Nawaz (PML-N) of three-time Prime Minister Nawaz Sharif.
Together, the two political factions achieved a simple majority sufficient to form a government, though they will also embrace smaller parties in the coalition.
The benchmark KSE100 index gained 901 points or 1.5 percent to close at 62,816 on Friday, buoyed by the commencement of the new government formation process. This process began with the oath-taking ceremony during the inaugural session of the Punjab Assembly on Friday and will be followed by a Sindh Assembly session on Saturday.
“Stocks closed sharply higher after the Punjab Assembly was sworn in, easing political noise and the International Monetary Fund’s affirmation on working with the new government on policies to ensure macroeconomic stability,” Ahsan Mehanti, CEO of Arif Habib Limited, told media.
Pakistani equity traders said investor confidence has increased as things are moving smoothly toward the formation of government at the federal and provincial levels.
“After the unexpected election results were announced, causing considerable anxiety among investors regarding future outcomes, the process of forming a new government has begun. This development has somewhat reassured investors,” Abdul Rauf, an equity trader, told Arab News.
Citing a statement from the IMF, Rauf said the fund seems happy with the new coalition government as both parties are experienced in dealing with it.
“PML-N and PPP will form the government together, and they have remained in power several times in the past, so they also have experience in dealing with the IMF,” he said, adding: “It seems that the IMF was quite pleased with them and expects a better outcome from them.”
Analysts believe that future market direction mainly depends on the next IMF program after the formation of the government.
“We feel that in the coming days, the IMF program will play a key role, and if the government of Pakistan quickly avails of the fund program, then the situation could substantially improve,” Sheheryar Butt, portfolio manager at Darson Securities, told Arab News.
Butt said it was predicted at the beginning of the year that the KSE100 index would cross the 76,000 level, but it still depended on how the government moved forward with the IMF program and its reform agenda.
“Pakistan is also facing an external [payment] gap, and if the external inflows continue and the privatization process is expedited, then you will see how the stock market goes up,” Butt added.
Analysts are optimistic that the current bullish sentiments will gain further momentum as the political landscape begins to stabilize with the formation of a new government expected in the coming week.
