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Stock Market Volatility: Factors Fueling Losses in a Jittery Week

The stock market experienced a challenging week as it opened negatively due to several factors impacting investor sentiment. One of the primary concerns was the substantial debt payment that Pakistan faced, with a staggering $3.7 billion due in May and June, as highlighted by rating agency Fitch.

The absence of Pakistan from the agenda of the International Monetary Fund (IMF) meetings further dampened hopes for the resumption of the Extended Fund Facility (EFF) program, adding to the overall pessimism. Arif Habib Ltd pointed out this absence as contributing to the downbeat market mood.

Political developments also played a significant role in shaping investor sentiments during the week. The arrest of former prime minister Imran Khan led to widespread protests across the country, triggering a period of political instability. However, as the week progressed, the political situation relatively eased off, bringing some respite.

Meanwhile, the State Bank of Pakistan (SBP) witnessed a decline in foreign exchange reserves, which fell by $74 million to reach $4.38 billion. Additionally, the Pakistani rupee depreciated by 0.53% against the US dollar on a weekly basis, closing at 285.10.

These factors collectively led to the benchmark index of the stock market closing at 41,488 points, down by 754 points or 1.8% from the previous week’s level.

AKD Securities emphasized that the market’s performance in the near term would depend on the move toward political stability. They recommended focusing on companies with dollar-denominated revenue streams and minimal dollar-denominated cost structures to hedge against currency risks.

Investors will closely monitor economic indicators, political developments, and international financial meetings for potential impacts on the stock market. While challenges persist, the market’s ability to recover and stabilize will depend on various factors that shape the economic and political landscape in the coming weeks.

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