Pakistan country-specific ETFs have been strengthening in recent weeks on a post-election rally and surged Monday, breaking back above its short-term trend line, on reports that China provided a $2 billion loan to bolster the emerging country’s foreign-exchange reserves.
The Global X MSCI Pakistan ETF (NYSEArca: PAK) rose 6.2% Monday and was trading back above its short-term trend line at the 50-day simple moving average.
Further supporting the gains, the U.S. dollar depreciated 5.4% against the Pakistan rupee currency to PKR121.645 Monday, paring a downward trend this year after Pakistan’s central bank devalued the rupee four times since December, weakening the currency by over 20%.
The Karachi-based Express Tribune newspaper revealed over the weekend that Beijing authorized a $2 billion loan while the Islamic Development Bank enacted a three-year $4.5 billion oil-financing facility, Bloomberg reports.
“Recent news flow regarding loan from China of $2 billion and possible assistance from Saudi Arabia is helping FX market sentiments, we believe,” Mohammed Sohail, chief executive officer of brokerage Topline Securities Ltd., said.
The loan added to expectations that Pakistan is also looking for what woudl be a 13th International Monetary Fund support program, Reuters reports.
“Without the IMF they would look really bad,” Aberdeen Standard Investments portfolio manager Wiktor Szabo told Reuters.
Imran Khan’s Party
Pakistan’s market has also been strengthening since mid-June ever since former cricket star Imran Khan’s party was expected to win the most seats during the general election. Khan is expected to address the country’s rapidly deteriorating finances, with many investors and analysts anticipating a bailout from China or the International Monetary Fund.
Khan is expected to enact reforms such as strengthening regulation over the country’s culture of tax evasion as only about 1% of the population pays income tax. He has also vowed to reform the Federal Bureau of Revenue in his first six months in office.
“Imran Khan is unlikely to be any investor’s top choice to run a country in such a precarious position, but any leader with the ability to form a government and take hard decisions is better than a protracted stalemate,” Carmen Altenkirch, Emerging Markets Sovereign Analyst at Aviva Investors, told Reuters.
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