Negativity returned to the bourse with the KSE-100 index dropping below the 45,000 level as investors opted to offload their holdings due to expected interest rate hike in an upcoming Monetary Policy Committee (MPC) meeting after six-month KIBOR reached a 13-year high level.

At the time of filing this report, the KSE-100 index stood at 44,656.96, registering a fall of 876 points or a percentage change of 1.49%.

Sana Tawfik, vice-president of research and a senior analyst at Arif Habib Limited (AHL), said that the bearish sentiment comes as the latest T-bill auction results were higher than expected.

“The market sentiment expects a policy rate hike in the upcoming State Bank of Pakistan (SBP) MPC meeting,” said Tawfik.

She added that the mechanism of rolling back of subsidies by the government as it seeks to revive the International Monetary Fund (IMF) Extended Fund Facility (EFF) program would determine the policy rate.

“We are expecting a 100 basis points hike,” she said, adding that this would discourage imports, while also moderating demand, which would also help in reducing the current account deficit.

The federal government raised more than Rs672 billion through the auction for short-term government papers.

The cut-off yield on government of Pakistan Market Treasury Bills (MTBs) increased up to 129 basis points (bps) in the auction held on Wednesday. In the previous auction on April 20, the margin on short-term government securities surged, ranging 55 bps to 70 bps.

The SBP conducted the auction for the sale of 3-month, 6-month and 12-month T-bills on April 27 and received bids worth Rs 708 billion with a realized value of Rs 657.46 billion.

The bids include Rs 340.711 billion for 3-month tenors, Rs 151 billion for 6-month tenors and Rs 216.257 billion for 12-month tenors. The federal government accepted bids amounting to Rs 614.410 billion. In addition, non-competitive bids worth Rs 58.034 billion were accepted. Total acceptance was Rs 672.44 billion against a target of Rs 500 billion set for this auction.

The cut-off yield of all short-term government securities mounted up, ranging between 96 bps to 129 bps in the auction held on Wednesday.

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