PSX remains on record breaking spree

KSE-100 index soars 1,671 points, or 3% WoW, closes at 57,063

KARACHI:

Pakistan Stock Exchange (PSX) maintained its winning streak in the outgoing week, advancing over 1,600 points, as investors were encouraged by the much-awaited staff-level agreement with the International Monetary Fund (IMF) and a significant fall in bond yields, which would lead to a reduction in the State Bank’s policy rate.

During the week, the KSE-100 index crossed the 57,000-point barrier for the first time in history and touched record highs a couple of times.

There were some discouraging factors as well such as reports about taxing windfall earnings of banks, MSCI’s decision to reduce Pakistan’s weight in the Frontier Markets Index and scarce foreign financing for the country. However, they could not restrict the market’s overall gains with healthy trading volumes.

At the beginning of the week, the market reached a new all-time high with significant gains of over 1,100 points due to increase in home remittances and a marked decline in bond yields. On Tuesday, the PSX extended its record-breaking run as the index rose nearly 150 points over smooth progress in the IMF’s first review under a $3 billion standby arrangement (SBA).

Next day, the bourse registered a slight change owing to worries about discussions in government circles on taxing the windfall earnings of banks and MSCI’s decision to reduce Pakistan’s weight in the Frontier Markets Index to 2.94%.

On Thursday, the index soared to another record high and crossed the 57,000-point barrier with an increase of more than 700 points on the back of investor enthusiasm over a staff-level agreement between Pakistan and the IMF. The market, on the last day of the week, saw a reversal of momentum after six successive sessions in the green as investors grew worried over a potential further hike in gas and power tariffs as part of the IMF’s programme.

The benchmark KSE-100 index surged 1,671 points, or 3% week-on-week (WoW), and closed at 57,063 at the end of the week.

JS Global analyst Shagufta Irshad, in her review, wrote that the KSE-100 continued to touch new peaks, closing at 57,063. Average market volumes remained strong at 761 million shares, up 40% WoW.

Optimism was mainly driven by decent inflows, a staff-level agreement with the IMF, growing anticipation of interest rate cut following recent drop in T-bill yields and a decline in both domestic and international oil prices, she noted.

“Pakistan is now expected to receive around $700 million in December subject to approval from the IMF’s executive board. Subsequent to the IMF talks, the government also hinted at a further hike in gas prices in January 2024.” The federal cabinet approved the imposition of 40% additional tax on banks’ income from forex trading retrospectively, which impacted the performance of bank stocks, she said.

Read:PSX jumps over 1,000 points after MSCI adds 15 more Pakistani companies

In other economic news, international oil prices continued to drop as they hit a four-month low, driven by concerns over the US and Chinese demand.

During the week, under the MSCI quarterly review, 17 Pakistani stocks were kept in the MSCI Frontier Markets (FM) Index with no change. However, there were adjustments in the MSCI FM Small Caps Index.

Kohat Cement, Maple Leaf Cement, Faysal Bank and Shell Pakistan were removed from the index while Pak Suzuki, Agha Steel, Sazgar Engineering and AGP were listed, the JS analyst added.

In its comments, Arif Habib Limited (AHL) said the market remained bullish during the outgoing week and reached a new high at 57,397.

It maintained the bullish trend on the back of a staff-level agreement between Pakistan and the IMF, which paved the way for the disbursement of the second loan tranche of $700 million, subject to the executive board’s approval.

Roshan Digital Account (RDA) inflows rose to $6.9 billion by October 2023, up from $6.7 billion in the previous month, AHL said.

State Bank’s reserves decreased $115 million to $7.4 billion. During the week, Pakistani rupee closed at Rs286.49 against the greenback with an appreciation of Rs0.54, or 0.18% WoW.

Foreigners’ buying continued during the week, which came in at $8.2 million compared to net buying of $1.3 million last week, it added.

Published in The Express Tribune, November 19^th, 2023.

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