January 2023 was most volatile month for Pakistan stocks due to uncertainties on both political and economic fronts.
According to AKD Research, the benchmark KSE-100 index of Pakistan Stock Exchange (PSX) closed the month up by a meager 253 points or 0.62 per cent on Month on Month (MoM), it had dipped down to as low as 38,342 points earlier in the month.
The pressure in the index was largely driven by worries on the country’s external front and the Monetary Policy action, announced on January 23, 2023.
The monetary policy committee raised the interest rate by 100 basis points to 17 per cent, which was in line with the market expectations.
Participation in the market improved during the month, with average daily traded volume standing at 273.8 million shares during January 2023 compared to 242 million shares in the previous month.
KSE-100 daily average traded volume stood at 97.9 million shares in January 2023, higher by 13per cent compared to the earlier month.
The International Monetary Fund (IMF) was remained in the limelight during the month. The analysts said that IMF ruled the headlines through the course of the mount, whether it be the demands put forward by the lender or the visit to discuss the ninth review.
The IMF’s nod is of utmost importance to the country, given that it would bring with it not just the $1 billion in funding, but also unlock multi-leteral and bilateral flows – at a time when Pakistan’s reserves have fallen to alarming levels.
The foreign exchange reserves held with the State Bank of Pakistan (SBP) dropped to $3.7 billion as of January 20, 2022, compared to $5.6 billion at end of December 2022.
Pakistan’s success in the IMF’s ninth review will be dependent on the country’s ability to implement some difficult decisions, including gas and electricity tariff hikes, along with additional taxation measures (PKR 200 – 300 billion).
The market driven exchange rate has already been implemented, illustrated by 14 per cent devaluation of the PKR against the greenback over a span of four trading sessions, while depreciating by 15.5 per cent MoM.