New Delhi, Dec 17 : The worsening macroeconomic fundamentals and aggravating sentiments have played havoc with three major markets of Pakistan’s economy, whereby they are not ready to buy the government-sponsored narrative on the economic front, The News reported.
Alarmingly, three markets, including the stock market, money market and exchange rate, are not reciprocating positively to the economic narrative being built by Pakistan’s economic managers, so downslide continues at an accelerated pace.
Prime Minister Imran Khan’s advisor on finance and revenue, Shaukat Tarin, and the Governor of State Bank of Pakistan, Reza Baqir, had publicly warned the commercial banks that they will take stern action if they continued exploiting the situation for offering Treasury Bills (T-bills) at higher rates, the report said.
The situation did not change on the ground mainly because the government had become desperate borrowers and commercial banks started dictating to the government on pitching higher offered rates for investing in T-bills.
The bankers knew that under the IMF agreement, the government could not borrow from the State Bank of Pakistan (SBP), so they had assumed the driving seat and dictated the government to invest in T-bills at higher rates and only in three months maturity.The official sources said that Pakistan’s stock market is not performing up to the mark as it seemed that foreign investors are pulling out by selling their stakes.
There is a need to analyse the fundamentals as well as sentiments to gauge the ground reality, the report said.Khaqan Najeeb, former advisor to the Finance Ministry, explained that the Karachi Stock Exchange (KSE) is 100 below 44,000 and continuous profit-taking despite market PE of 5, an exchange rate moving only in one direction and hitting a record all-time low of Rs 177, and a higher T-bill auction of three months at 10.78 oer cent and six months at 11.5 per cent, disregarding SBP’s forward guidance, the report added.He said, “The markets have to start trusting an economic narrative, but at present that doesn’t seem to be the case.”
Pak markets not buying govt-sponsored narrative on economy
Knowing that the IMF agreement prohibited the government from borrowing from the State Bank of Pakistan, (SBP), the bankers took control of the situation and ordered the government to buy T-bills at higher interest and with a three month maturity.Official sources stated that Pakistan’s stock markets are not performing as expected.It seems that foreign investors have been selling off their shares to get out of Pakistan.
According to the report, it is important to analyze the sentiments and the fundamentals of the stock market to determine the reality.
Khaqan Najeeb was a former adviser to the Finance Ministry.
He explained that Karachi Stock Exchange is 100 below 44,000, continuous profit-taking in spite of market PE of 5.An exchange rate that moves only one way and hits a record low of Rs.177.A higher T-bill auction with three months at 10.78 and six months respectively at 11.5%, disregarding SBP’s forward guidance.
He stated, “The market must trust an economic narrative.But at the moment that does not seem to be happening.”
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