Market Sentiment Shift: 82% Expect Policy Rate Range of 16-20%

As many as 23% of participants now expect the PKR/USD to be between Rs250-270 by Dec 2024

Staff Report

As many as 82% of participants now expect the policy rate to range between 16-20% by Dec 2024, compared to the survey conducted 6 months ago where 82% of participants anticipated the same range by Jun 2024.

According to the recent survey, 44% of participants anticipate the policy rate to fall within the range of 16-18%, while 38% anticipate it to fall within the range of 18-20% by Dec 2024 if a new IMF deal is finalized.

This contrasts with the survey conducted 6 months ago in Oct 2023, where 41% of participants anticipated the policy rate to be in the range of 16-18%, and 41% anticipated it to be in the range of 18-20% by Jun 2024.

Topline Research conducted a poll of key market participants to gather their views on several macroeconomic and market indicators, assuming that a new IMF program will be confirmed within the next few months.

Interestingly, market participants’ views on the policy rate and PKR/USD parity outlook have shifted six months ahead, and participants are now more bullish on the stock market compared to surveys conducted 3-6 months ago.The SBP increases the Policy Rate by 100bps

No Major Fall Expected in PKR: In response to our question regarding the PKR/USD parity outlook in the interbank market by Dec 2024 after the new IMF program, 49% of the participants anticipate the PKR/USD parity to range between Rs290-310.

This contrasts with the previous survey conducted 3 months ago in Dec 2023, where 38% of participants expected the PKR/USD to be between Rs290-310 by Jun 2024. Thus, many market players now see some stability in the local currency.

Interestingly, 23% of participants now expect the PKR/USD to be between Rs250-270 by Dec 2024, compared to only 2% of participants who expected the same range by Jun 2024 in the survey conducted 3 months ago.

KSE 100 Index Outlook: In response to the question regarding where participants see the benchmark KSE 100 Index by Dec 2024 after the IMF deal, 35% of participants anticipate the index to be in the range of 70-75K.

This contrasts with the survey conducted 3 months ago in Dec 2023, where 30% of participants expected the market to be in the range of 60-65K.

Additionally, 21% of participants now expect the index to be above 80K compared to only 11% in the previous survey.

Topline, in its annual strategy piece titled ‘Stock Market Recovery Has Just Begun,’ issued on Nov 18, 2023, estimated that the Index can reach 75k in 2024.

This estimation was based on the assumption of no PE re-rating. We believe that a better-than-expected and timely IMF deal has the potential to re-rate the market, whereby the Index can even cross the 75k mark during 2024.