KARACHI: Brokers, dealers and investors at the stock market were taken by surprise over the SBP decision to raise the discount rate by 50bps. The consensus view at the market until the SBP governor unveiled the Monetary Policy Statement (MPS) on Friday evening was of ‘no change’ in at least the current policy statment. “Yes, it is a bit unexpected”, said Arif Habib, former chairman KSE. He thought that decrease and increase of 50bps in a matter of three months was not in sync and that the decrease in the last MPS and the increase in the Friday announcement were both, unnecessary. He however thought that one good aspect of the unexpected SBP decision perhaps was the central bank had provided proof of its independence in financial decision-making policies. Mohammad Sohail, CEO at Topline Securities, said that the higher inflation outlook of the SBP shocked the market participants, who were relying more on government-IMF agreement and expecting no change. “Moreover senior government officials outside the SBP were making statements alluding to the status quo. All of it has given conflicting signals to the market,” he said, adding that time alone will tell when and for how many months inflation remains above 9.5 per cent. Faisal Shaji, head of research at stock brokerage firm, Standard Capital Securities observed that for the last one month, the money market rates were stable at 9 per cent. “Had there been the slight indication of an upward revision in policy rates, the yield would have gown up to 11-12 per cent”. He thought that since Pakistan had a multivariable economy, inflation numbers should not alone be the basis of interest rate change. “The SBP has given an indication that it visualises inflation to stand in the region of 12-13 per cent for full financial year”, said Shaji. Several analysts thought that the change of government did not indicate the change of mindset. “It is more of the same”, said one. The increase, he said was a dampener on investor confidence and would stunt industrial growth, as before. Raza Jafri, head of research at AKD Securities, affirmed that the decision for the analysts’ community was unexpected, though the sales dealers at the stock market suspected that something different was in the air. He believed that as the rumours of a possible raise was doing the rounds in the stock market; about 50 per cent of the impact had already been priced in. Yet the stock market could detract by 1 to 2 per cent on the surprise decision, when the market opens next week. The cement, textile and fertiliser sectors, which are generally highly leveraged, would take the heat, but he said that they accounted for only 2 to 3 per cent of the market float. For the oil and gas sector, the impact was flat while banks, which together with oil and gas sector formed 50 per cent of the index, the increase would be healthy as it would put a bit of gloss on their bottom lines.
Posted on: Wed, 18 Sep 2013 18:09:35 +0000