Revision in Policy rate may raise concerns for market (07112008}

LEADER REPORT
KARACHI: The local bourses remained at their previous levels of 9,183, as almost no activity was witnessed, with 4 gainers versus 8 decliners and volumes stood at 236k. Investors remained dormant as the flooring has set the market under immense pressure.
Increase in 3M T-Bill's yield, an indication for discount rate increase
SBP on Thursday raised the 3M cut of yield on T-bills by 97 bps to 13.56 percent whereas discount rate remained 13 percent. This has raised the probability that SBP will be looking forward to increase its discount rates. While considering the inflation rate and rupee dollar parity, it is expected that this increase will be around 100 to 150 bps. However, in order to counter the liquidity crisis, SBP took a minor measure to provide 100% refinancing to banks under the Export Finance Scheme (EFS) for export financing.
IMF to remain last resort for Pakistan
After no specific announcement of aid by Saudi Arab in second attempt to contemplate, IMF remains the last hope to stop depleting foreign exchange reserves. Some temporary agreements have been reached for a bailout package of USD 9.6bn for 2-year funding, but this will come up with stringent terms and conditions, the trailer of which is yet to come that will include squeezing the demand of funds through further monetary tightening and reduction in subsidy expenses of the Govt.
Global indices continue with bearish activity
Positive activity seen after Democratic win in US presidential election ended up in red zone. While US dollar appreciates against euro on the ground of economic stability to be transformed by the newly elected President.
Uncertainty concerning removal of floor surge
The static situation of the market is expected to continue. With the continuation of floor for an indefinite period, uncertainty and curiosity of investors related to the future of the market is increasing. Measures by GoP to provide liquidity to the market may slightly ease of the pressure, while the market will witness a downfall.