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Broker is busy in trading at Pakistan Stock Exchange in Karachi on Wednesday, January 1, 2025. — PPI
#PSX #extends #losses #energy #sector #concerns
Capital markets extended their downtrend on Tuesday as profit-taking, mutual fund exits, and pressure on energy stocks dented investor confidence.
Concerns about revolving debt in the gas sector and rising government debt levels further added to cautious market sentiment.
The benchmark KSE-100 index of the Pakistan Stock Exchange (PSX) closed at 116,052.68, down 202.44 points, or -0.17%, from the previous session’s close of 116,255.12. The market touched an intraday high of 116,843.41, before falling to a low of 113,677.50, on heavy selling pressure.
“Profit through redemptions in some large mutual funds,” said Muhammad Saad Ali, director of research at Intermarket Securities Ltd.
“News of RLNG diversion to residential consumers pressured energy names, which could lead to fresh rise in revolving credit,” he added.
Regasified in January 2025 against 250 mmcfd in December 2024 under the jurisdiction of Sui Northern Gas Pipelines Ltd. Liquefied natural gas (RLNG) in the domestic sector increased by 450mmcfd. This increase is expected to increase the revolving credit in the gas sector.
The current average domestic tariff is Rs 1,250 per mmbtu, while the RLNG tariff is Rs 3,600 per mmbtu. This Rs 2,350 per MMBTU difference will directly contribute to rising revolving credit, raising fears of financial stress on gas utilities.
Finance Minister Muhammad Aurangzeb, while addressing a Senate Standing Committee meeting on Monday, projected a strong current account surplus for FY25 while ruling out any pessimistic measures that could threaten economic stability.
“Three years ago, the government accelerated the growth rate, which strained the balance of payments,” Aurangzeb said. “But no matter how much pressure there is now, we will not repeat this mistake.”
Dismissing liquidity concerns, the minister clarified that there have been no complaints regarding opening of letters of credit (LCs) in the last 10 months. “No foreign company has been prevented from repatriating profits abroad, indicating no pressure on the currency,” he noted.
Highlighting foreign interest in Pakistan’s economy, Aurangzeb cited significant investment commitments from major global players including Saudi Aramco, Chinese firm Norenko, and electric auto company BYD.
The State Bank of Pakistan (SBP) reported on Monday that total government debt increased by Rs 1.452 trillion, or 2.1 percent, to Rs 70.366 trillion by November 2024 in the first five months of FY25. This is the reason for this increase. Government expenditure in excess of revenue collection and external debt service requirements.
Total debt as on June 30, 2024 was Rs 68.914 trillion. Loans grew by 1.8 percent month-on-month and 11 percent year-on-year (YoY) through the end of November.
Domestic debt rose by 3 percent during July-November FY25, to Rs 48.585 trillion, an 18 percent year-on-year increase. Meanwhile, external debt rose marginally by 0.11 percent to Rs 21.78 trillion in the same period, though it declined by 2.91 percent year-on-year and 0.5 percent month-on-month.
Rising government debt levels, coupled with pressures in the energy sector, have raised concerns about fiscal stability. The issues have come to light as Pakistan prepares for a critical review under the International Monetary Fund’s (IMF) Extended Fund Facility (EFF) to unlock the next tranche of $1 billion in March.
The IMF’s proposed levy on gas supply to industrial captive power plants (CPPs) remains an important structural criterion under the EFF.
In addition, Pakistan is set to receive $20 billion from the World Bank over the next decade as part of its Country Partnership Framework 2025-35.
The funding, pending approval on January 14, will be in line with the government’s National Economic Transformation Plan, which will target GDP growth, poverty reduction, and infrastructure improvements.
Inflation trends showed some respite with short-term inflation, as measured by the Sensitive Price Index (SPI), recording a modest weekly decline of 0.26% for the week ending January 2, 2025. However, year-on-year inflation remained high. At 3.97 percent.
Textile exports, a key contributor to the economy, rose 10 percent year-on-year to $9.9 billion in the first half of FY25. This reflects Pakistan’s resilience in an important sector despite external challenges.
On Monday, the PSX saw significant declines, with the KSE-100 index closing at 116,255.12, down 1,331.86 points or -1.13% from the previous session’s close of 117,586.98.
