Stock prices leap as PTI chief beats a retreat

KARACHI: Buoyed by some return to normalcy in Islamabad, the benchmark-100 index of the Pakistan Stock Exchange (PSX) posted its largest one-day gain in history, increasing 1,406.23 points on Tuesday to eclipse the previous-highest of 1,306.83 points recorded on March 31, 2015.

The KSE-100 Index – a benchmark for market performance – powered up to 41,299.87, an increase of 3.52%, as investors cheered Imran Khan’s decision to retreat from his earlier threat of locking down the federal capital and, instead, gather for a ‘thanksgiving rally’ after the Supreme Court announced the formation of a judicial commission to probe Panamagate allegations against the Sharif family.



In terms of percentage, the increase was the 31st largest gain posted by the country’s stock exchange since 1991. The rally also meant that the index covered most of its losses since it hit its highest level of 41,545.95 points on October 20, before political noise increased to make investors jittery, only to take a turn for the worst when the government clashed with PTI protestors looking to make their way into the federal capital.

“[The increase has] more to do with PTI’s decision to back down and then with the decision of Standard & Poor’s to raise Pakistan’s long-term credit rating [from B-Negative to ‘B’ with stable outlook],” Shahbaz Ashraf, head of research at Arif Habib Limited, told The Express Tribune.

“Investors had remained jittery as the date of protest [November 2] neared. Locals had offloaded equity and were monitoring political developments. The [apex court’s] decision was seen as a positive trigger.”

Ashraf’s comments came in the wake of across-the-board buying on Tuesday, helping the index near its record high. Banks, cements and steel stocks attracted attention after the recent correction that saw the index retreat close to 4% over seven trading sessions.

“The index was helped by [off-the-record] cement sales figures for October that are higher than in the previous month. Reports that cement manufacturers are likely to increase prices by Rs10 for a 50-kg bag after the recent surge in coal prices resulted in a rally in the sector. The increase in prices is likely to be implemented by December.”



Bank stocks gained on a higher core inflation figure that amounted to 5.2% year-on-year, which could mean an end to the status quo adopted by the central bank in its monetary policy.

Ashraf said investors would monitor political developments in the near term but the overall sentiment in the market remains positive. “Market talk suggests that there could be profit-taking [on Wednesday]. But I see another increase in the offing. The Sindh Pension Fund is injecting billions into the equity market and some financial results have beaten street consensus.”

However, Ashraf said some events are to be watched out for. “The transition to the new army chief needs to be a peaceful one [the decision is due before November 29]. Any sort of instability will turn investors away.

“Recently, the PSX’s correlation with international stock markets has also increased. Hence, I feel the index’s movement will also be determined by the result of the US elections. Hilary Clinton’s victory is more widely perceived as a positive for stock markets.”

Published in The Express Tribune, November 2^nd, 2016.