Downward pressure enveloped the Pakistan Stock Exchange on Monday as the benchmark KSE-100 index fell more than 700 points in intraday trading ahead of the monetary policy announcement by the State Bank of Pakistan ( SBP).
A large part of the market expects the central bank to raise the interest rate by almost 100 basis points, while a small segment expects the policy rate to remain unchanged.
MPC Meeting: Majority of Respondents Expect Big Rise in Policy Rate
At 2:56 p.m., the KSE-100 was trading at 42,369.9 points, down 730.81 points or 1.7%.
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Headline inflation has remained in the double digits since November 2021, mainly due to higher food and energy prices. This phenomenon is still continuing – the figures hit a nearly two-year high in April, reaching 13.4%, with the pressure coming mainly from rising food and commodity prices, according to a report by Arif Habib Limited on the next statement from the Monetary Policy Committee.
A looming economic crisis and concerns over the International Monetary Fund (IMF) bailout stimulus also rattled investor confidence.
Earlier on Monday, Finance Minister Miftah Ismail said his team would ask the international lender for a “pause” because the government could not raise prices for petroleum products.
Experts have called the resumption of the IMF program crucial, as the green signal from the international lender would pave the way for additional financing from other creditors.
KSE-100 closes down 0.1% in mixed session
Ismail felt that the Pakistani public could not bear a massive increase in POL rates. Talks between Pakistan and the global lender are ongoing.
Ismail Iqbal Securities, Head of Research, Fahad Rauf, said company registrar that apart from monetary policy speculation, uncertainty over economic conditions and the lack of news related to the termination of the IMF bailout also impacted the equity market.