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Pakistan's share market rose to its highest in more than six years on Friday, buoyed by the announcement of the date for an national election and optimism that visiting IMF officials will recommend releasing the next tranche of a loan.
Pakistan will vote on Feb. 8, an election commission spokesman said on Thursday, giving investors hope that some political stability and less economic uncertainty will follow once a new government is formed.
The vote initially had been expected to have taken place by early November, and a caretaker government was installed in mid-August to run the country until the next government emerged from the election.
The benchmark stock index struck a record intra-day high of 53,263.07 on Friday, rising 1.15% from Thursday close, before settling back slightly. It was the highest since May 25, 2017.
Despite Pakistan's political and economic difficulties the index has gained more than 30% this year, with a turnaround in fortunes coming after the International Monetary Fund approved a $3 billion loan programme in July to avert a sovereign debt default.
The share market recovery has a long way to go. Adnan Sheikh, an independent economist, said the market capitalisation was around $27 billion, having been about $100 billion in 2017.
He said the steep depreciation of the Pakistan rupee, as the country slid into a balance of payments crisis, was largely to blame for the drop in market cap.
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"The market in dollar terms is still undervalued. The KSE100 index is at around 20,000 points if compared to the dollar value in 2017," Sheikh said.
Investors also took heart from the arrival of an IMF team in Pakistan for talks on the release of the next tranche of around $700 million by December.
"We are in compliance with the IMF structural benchmarks for this review," said Shahbaz Ashraf, Chief Investment Officer at FRIM Ventures, a Karachi-based investment company.
Ashraf said that a successful IMF review will help bring external inflows vital for disinflation and stability in the rupee, which recovered from record lows in September.
Investors expect an imminent cut in the central bank's policy interest rate, currently set at a record high 22%, as inflation appears to have peaked, having slowed to 26.9% year-on year in October.
While price pressures may be easing Pakistan's other economic problems persist - low economic growth, weak exports, high interest payments on debt, and the constant need to manage precious foreign exchange reserves.
