PSX Hits Record High Amid Positive Economic Indicators

KARACHI:

The Pakistan Stock Exchange (PSX) experienced a remarkable surge last week, reaching a new all-time high by surpassing 83,500 points. This upward momentum comes as a result of a series of positive economic developments that have boosted investor confidence after a period of market volatility.

A key factor contributing to this rally was the significant drop in inflation, which fell to a 44-month low of 6.9% in September 2024. This sharp decrease in inflation, combined with the government’s repurchase of treasury bills worth Rs351 billion at reduced rates, played a pivotal role in restoring market stability.

Throughout the week, the Pakistani rupee remained resilient against the US dollar, further supported by an increase in the State Bank of Pakistan’s (SBP) foreign exchange reserves. The reserves grew by $1,168 million, reaching a total of $10,702 million, after Pakistan received its first loan tranche of $1,026.9 million from the International Monetary Fund (IMF).

Despite a shaky start earlier in the week, where the KSE-100 index dropped by 178 points due to political uncertainty and foreign fund outflows, the market quickly rebounded on Tuesday. The positive momentum was further propelled by favorable economic indicators, such as the stabilizing rupee, falling global commodity prices, and growth in the agriculture sector.

The rally gained additional strength on Thursday, thanks to the government’s treasury bill repurchase program. By Friday, the PSX hit a historic milestone, crossing the 83,500 mark for the first time, driven by strong investor interest in blue-chip stocks and declining government bond yields.

By the end of the week, the KSE-100 index stood at 83,532 points, marking an impressive gain of 2,240 points, or 2.76% week-on-week (WoW).

According to JS Global analyst Abdul Basit, the KSE-100 maintained its bullish trend throughout the week, with local investors, particularly mutual funds, leading the charge despite foreign outflows totaling $26 million. The disinflationary trend in the economy, highlighted by the four-year low Consumer Price Index (CPI) reading of 6.9% for September 2024, further reinforced investor optimism.

The State Bank of Pakistan’s reserves reaching $10.7 billion—a 29-month high—was another positive indicator, largely attributed to the IMF loan disbursement under the Extended Fund Facility (EFF).

The government’s recent T-bill auction also contributed to the positive sentiment, raising Rs244 billion against a target of Rs250 billion, with six-month and 12-month yields dropping to their lowest levels since April 2022.

Despite these positive developments, Pakistan’s trade deficit widened by 4% year-on-year (YoY) in the first quarter of FY25, while exports increased by 14% during the same period. On the fiscal side, the government missed its revenue collection target for Q1 FY25 by Rs87 billion, collecting Rs2,452 billion against the target of Rs2,539 billion.

Arif Habib Limited (AHL), in its report, noted the stock market’s historic achievement, attributing it to several key economic factors, including the sharp decline in inflation and the government’s treasury bill buyback program. Additionally, Pakistan’s gross domestic product (GDP) grew by 2.52% in FY24, driven largely by the agriculture sector.

In terms of sectors, the biggest contributors to the market’s growth were fertilizer (716 points), oil and gas exploration (585 points), commercial banks (297 points), cement (241 points), and oil and gas marketing companies (122 points). Individual stocks that performed well included Fauji Fertilizer Company (512 points), Pakistan Petroleum Limited (222 points), Oil and Gas Development Company (212 points), United Bank Limited (108 points), and Pakistan Oilfields (98 points).

Despite continued selling by foreign investors, amounting to $26.1 million in outflows compared to $10.5 million in the previous week, local buying sustained the market’s upward trajectory.

As the PSX continues its bullish run, the strong fundamentals underpinning this rally suggest that investor confidence is likely to remain high in the coming weeks.

read more: https://jininews.pk/2024/10/06/foreign-corporate-exodus-from-pakistan-a-myth-dispelled/