KARACHI—Pakistan’s main stock index has experienced its most significant surge in 15 years following the announcement of a $3 billion loan agreement with the International Monetary Fund (IMF). The deal has provided much-needed relief, alleviating fears of a potential default.
The benchmark KSE-100 Index saw a substantial increase, prompting a one-hour trading halt at the start of the session after the three-day Eid holiday. At its peak, the index rose by 6.3%, marking its largest gain since 2008.
The market’s affordability has also contributed to its positive performance. Concerns arising from recent negative headlines, including political instability, the risk of debt default, and a declining rupee, had caused investors to retreat. As a result, the KSE-100 Index had become the world’s most attractively priced equity benchmark.
Additionally, Pakistan’s dollar-denominated bonds experienced notable growth. Bonds due in 2024 surged more than 20 cents in the past week. On Monday, the 8.25% 2024 bond increased by 0.2 cents to reach 72.5 cents on the dollar, a level not seen since August of the previous year. These gains follow the best week ever recorded for dollar bonds.
Positive economic indicators have further contributed to the market’s optimism. In June, Pakistan’s inflation rate decreased for the first time in seven months, primarily due to higher borrowing costs restraining demand and lower commodity prices. The Pakistan Bureau of Statistics reported a 29.40% increase in consumer prices in June compared to the same period the previous year. This figure was below the median estimate of a 30.8% rise projected in a Bloomberg survey and a record 37.97% surge witnessed in May.
Market observers believe that the IMF bailout agreement will have a transformative effect. Barclays upgraded Pakistan’s debt to market weight in response to this development. Moody’s Investor Service anticipates that the deal will facilitate support from bilateral and multilateral partners, assisting Pakistan in meeting its obligations regarding high external debt repayments. Analyst Grace Lim stated in an email that the agreement is expected to bring about positive outcomes for the nation.
