KARACHI (Web Desk) – Pakistan Stock Exchange ended the Tuesday session in red zone after shattering the 71,000 during early trading, as geopolitical uncertainty, possible delay in US interest cuts and the fears about a rebounding inflation at home influenced the market sentiments.
The benchmark KSE-100 Index closed the day at 70,483.66 with a net daily loss of 60.92 points, or 0.09 per cent, after touching an intraday high of 71,092.61.
Earlier in the session, the buying was witnessed in the case of commercial banks and energy companies as possible Saudi investment boosted the hopes of economic revival in a country where high borrowing costs and energy prices have crippled the economy.
However, the market could not sustain the momentum amid the absence of any concrete development as well as the feeling that the fuel price hikes and the planned increase in electricity and gas prices would keep the inflation high, translating into a delay in the much-awaited interest rate cuts by the State Bank of Pakistan.
At the same time, a report from the Commerce Department on Monday showed that the US retail sales increased more than expected in March amid a surge in receipts at online retailers, further evidence that the economy ended the first quarter on solid ground.
Read more: Strong US retail sales create fears that there won't any Fed rate cuts until September
It followed news this month of robust employment gains in March and a pick-up in consumer inflation, bolstered expectations that the Federal Reserve could delay cutting interest rates until September. Some economists see the window for lowering rates this year closing.
Saudi Finance Minister Prince Faisal bin Farhan is in Islamabad on a two day visit to hold talks with the country’s top leadership on the matters related to investment in different sectors – a move, if materialised, which is likely to pave the way for others to join the trend due to the influence and trendsetting nature of Saudi Arabia.
Earlier, Prime Minister Shehbaz Sharif and Saudi Crown Prince Mohammed bin Salman had reaffirmed their commitment to expedite the first phase of a new Saudi investment package worth $5 billion in Pakistan.
On the other hand, Finance Minister Muhammad Aurangzeb told AFP in an interview that Pakistan had initiated discussions with the IMF (International Monetary Fund) over a new multi-billion dollar loan agreement to support its economic reform programme.
"I do think that we will at least be requesting for a three year programme," Aurangzeb said. "Because that's what we need, as I see it, to help execute the structural reform agenda."
Separately, he said at an event at the Atlantic Council think tank in Washington that the purpose was to agree the strategies with the IMF, and get the EEF (Extended Fund Facility) in place as quickly as possible.
Read more: Dollar rally supercharged by US rate outlook, could complicate inflation fight for other economies
The stock market was earlier betting on interest rate cuts by the State Bank of Pakistan after the consumer price index (CPI) witnessed a marked decline in March for the second consecutive month. However, imminent electricity and gas tariff hikes as well as the consistent increase in fuel prices may affect the trend which will ultimately delay the rate cut cycle in Pakistan.
In fact, the very possibility of a new larger deal sought by Islamabad from the IMF means that there would be more energy price hikes and a longer period of monetary tightening, which means more inflation with the interest rates staying higher for a longer period.