IMF positive review resists index to fall further

[LahoreEstate]

By: Mr. SALMAN ABDUHOO | Published: March 01, 2009

LAHORE - The equity market plunged by 4 per cent- the highest fall in 32 months- on the back of political uncertainty following the disqualification of Sharif brothers to hold electoral office, however the positive review of IMF resisted the index to erode further, analysts said.
Experts are of the view that the KSE 100 Index fell by 5 per cent on Wednesday following the imposition of governor’s rule in Punjab. However, the market closed the week on 5,727 level, down only 4 per cent WoW as positive review of IMF coupled with 100bps decline in T-bill yields supported the market.
The equity market expert Atif Zafar observed that stock market initially reacted negatively on political developments as street protests disturbed law and order situation particularly in Punjab amid opposition leaders being barred from holding any electoral office.
However, the market rebounded the next day as positive review of IMF came to the front. On completion of its first review, IMF praised authorities for sustaining strong macroeconomic policies and hinted interest rate cut if inflation falls further. Moreover, 100bps decline in T-bill yields in last week’s auction provided much-needed boost to the market. Market experts from BMA Capital were of the view that some pressure is likely on index levels in the coming days, though swift resolution to this situation will be imperative in keeping equity market performance steady in the mid term. On the other hand, earnings results are in full swing and earnings growth has been healthy.
Media reports said that the IMF has expressed its pleasure at measures taken by the government to comply with its targets and the next tranche of $800 million is expected at the end of Mar09. Consequently, a discount rate cut of 100-150 bps in Apr09 will start to appear as well as the possibility of readmission in to the MSCI indices in May09 may happen experts claim.

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