Market watch: KSE-100 skyrockets as Mideast tensions de-escalate

Benchmark index increases 1,165.5 points to settle at 42,523.07

KARACHI: Stocks rallied on Thursday as the benchmark KSE-100 index soared over 1,166 points due largely to de-escalation in Middle East tensions.

US President Donald Trump on Wednesday hinted in his speech at alleviation of geopolitical tensions in response to Iran's missile attacks on US bases in Iraq.

In addition to that, yields of Pakistan Investment Bonds (PIBs) fell 10 basis points late on Wednesday, which bolstered investor sentiment as they expected a reduction in the key policy rate in the next monetary policy announcement.

Market analysts expect the Pakistan Stock Exchange to recover in the coming days from the losses borne on account of escalation in regional tensions. A US drone attack that killed a top Iranian military commander Qassem Soleimani and Iran's retaliatory attacks on US bases in Iraq had sent stock markets around the world tumbling and Pakistan's bourse was no exception.

Trading kicked off with a sharp spike at the Pakistan Stock Exchange on Thursday and the uptrend continued for the rest of the day.

At close, the benchmark KSE 100-share Index recorded an increase of 1,165.5 points, or 2.82%, to settle at 42,523.07.

Speaking to The Express Tribune, Arif Habib Limited Head of Research Samiullah Tariq said normalisation of the Middle East tense situation sparked a rally at the bourse.

"The market is just correcting itself. Earlier, it fell multiple times due to escalation of tensions, however, now it is recovering from those losses," he said.

Tariq was of the view that the recent fall in PIB yields by 10 basis points may also have helped strengthen investor sentiment and aided the rally.

BMA Research Executive Director Saad Hashmi said the market resumed its uptrend post-relief in the wake of easing of Mideast tensions.

He added that prior to the US airstrike, the market was immensely bullish and "since tensions have now gone down, it has resumed its bull-run".

"In the past few days, the Middle East became a hot bed of conflicts, which impacted Pakistan's stock market but now it is again in control of the bulls," Hashmi said.

He pointed out that investors' sentiment was strong as they expected the interest rate to fall because of the inflation reading being largely in line with market expectations coupled with a continued fall in PIB yields in past weeks.

"The market saw the rally following US President Donald Trump's speech that hinted at no major retaliation in response to the Iranian missile attacks on US military bases in Iraq," Topline Securities Director Research Arif Zafar said.

The market had already touched 16-month highs above 42,400 points before the heightening of Mideast tensions, which dragged the market down. The analyst anticipated an extended rally in the coming days and weeks.

"From here onwards, we see the first resistance at around 47,000 points if no major negative event took place," Zafar said. "Rich individual investors are the major buyers at the stock exchange these days."

Though foreigners had not yet been net buyers, there a significant drop in sales by them at the bourse, he said.

Overall, trading volumes rose to 362.5 million shares compared with Wednesday's tally of 280.1 million. The value of shares traded during the day was Rs13.8 billion.

Shares of 381 companies were traded. At the end of the day, 325 stocks closed higher, 44 declined and 12 remained unchanged.

The Bank of Punjab was the volume leader with 53.1 million shares, gaining Rs0.76 to close at Rs12.57. It was followed by K-Electric with 33.5 million shares, gaining Rs0.3 to close at Rs4.73 and Unity Foods with 24.3 million shares, gaining Rs0.95 to close at Rs16.14.

Foreign institutional investors were net buyers of Rs445.7 million worth of shares during the trading session, according to data compiled by the National Clearing Company of Pakistan.