New govt hopes spur stock market

KSE-100 index soars 2,943 points, or 4.9% WoW, closes at 62,816

KARACHI:

Pakistan Stock Exchange (PSX) surged nearly 3,000 points in the outgoing week in a rally spurred by an agreement among major political parties to form a coalition government, which largely addressed the political instability that had prevailed since elections in early February.

Investors expected the incoming government to take pro-growth measures and approach the International Monetary Fund (IMF) for a new loan programme of at least $6 billion.

Among the positives, Pakistan’s dollar bonds jumped in the international market and the Roshan Digital Account saw further inflows of nearly $150 million from overseas Pakistanis.

On the other hand, Pakistan’s current account balance shifted from surplus to deficit while yields of treasury bills went up, contrary to expectations of a decline in the State Bank’s policy rate in the near future.

At the beginning of the week, the bourse witnessed a notable recovery from the losses incurred last week, driven by investor optimism about a breakthrough in negotiations for installing a coalition government.

Next day, the KSE-100 index failed to protect Monday’s gains as uncertainty prevailed because of the emerging political scenario.

Stocks bounced back on Wednesday with the easing of political concerns following an agreement among major parties on forming the next government.

The following day, the KSE-100 index extended gains and closed near the 62,000-point mark, buoyed by optimism about a power-sharing deal among political parties.

On Friday, the market reflected growing economic stability and investor confidence, which emerged as major influencing factors when political uncertainty died down, leading to a surge of around 900 points.

Overall, the benchmark KSE-100 index rose 2,943 points, or 4.92% week-on-week (WoW), and settled at 62,815.82.

JS Global analyst Muhammad Waqas Ghani, in his review, noted that the KSE-100 index gained 5% following an agreement among political parties to press ahead with the formation of a coalition government led by the PML-N.

Read PSX soars as political gridlock breaks

Average volumes, however, decreased 3% WoW to 338 million shares per day. Pakistan’s dollar bond prices jumped in the range of 1-6% after the two major political parties reached an agreement on forming the next government, he said.

Meanwhile, the current account returned to the red zone in January 2024 with a deficit of $269 million, which took 7MFY24 deficit to $1.1 billion. The $700 million current account gap was broadly led by a higher trade deficit that went up $600 million month-on-month (MoM).

Moreover, power generation during January 2024 decreased 2% year-on-year (YoY) while generation cost surged 23%. The State Bank of Pakistan (SBP) reported a 0.5% WoW decrease in foreign currency reserves, which had remained around $8 billion for the past three months.

In T-bills’ auction, cut-off yields increased in the range of 33 to 126 basis points for papers of different maturities, the JS analyst added.

Arif Habib Limited (AHL) reported that the market remained buoyant, taking the index beyond 62,000 points from 59,000 last week.

Investor sentiment got a boost as the winning political parties reached agreement to form a coalition government.

On the economic front, the current account shifted to a deficit of $269 million in January 2024 from a surplus of $404 million in December 2023. Meanwhile, returns on National Saving Schemes decreased in the range of 40 to 160 basis points.

Power generation in the country climbed 7.6% MoM in January 2024 while the Roshan Digital Account saw inflows of $142 million in the same month, settling at $7.3 billion.

Sector-wise, positive contribution to the market came from exploration and production (623 points), banks (513 points), technology and communication (355 points), fertiliser (255 points) and power (254 points).

Foreign buying continued during the week under review, which came in at $2.9 million compared to net buying of $5.2 million last week, AHL added.

Published in The Express Tribune, February 25^th, 2024.

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