PSX remains buoyant on political stability

KSE-100 index surges 2,510 points, or 4% WoW, settles at 65,325.69

KARACHI:

Pakistan Stock Exchange (PSX) remained buoyant during the outgoing week as the KSE-100 index climbed around 2,500 points, propelled by investor optimism about political stability caused by the initiation of the process of forming a new government.

Foreign investors continued to engage in stock buying and they further built their portfolio while Moody’s maintained Pakistan’s credit rating with a stable outlook.

These developments, along with a further decline in trade deficit, fall in inflation and world stocks at record highs, provided investors the enthusiasm required to push the market higher.

At the beginning of the week on Monday, the bourse spiked as investors were encouraged by the easing of political turmoil following the election of chief ministers of Sindh and Punjab provinces.

Next day, stocks came under selling pressure, triggered by political uncertainty owing to delay in calling the first National Assembly (NA) session after general elections in early February.

Bulls held their firm grip on Wednesday when bullish momentum returned, which helped the KSE-100 gain nearly 500 points. It came after Moody’s maintained a stable outlook on Pakistan’s credit rating.

As political clarity emerged on Thursday, the market extended its bullish run where investors resorted to hefty buying over the commencement of formal legislative proceedings, propelling the index higher by over 870 points. The market rallied again on Friday as uncertainty about the formation of a new government evaporated, which dispelled investor fears and helped the KSE-100 gain nearly 750 points.

Overall, the benchmark KSE-100 index rose 2,510 points, or 4% week-on-week (WoW), and settled at 65,325.69.

JS Research analyst Shagufta Irshad, in her report, stated that the KSE-100 index gained 4% WoW as investors welcomed the initiation of the process of installing a new government.

Average volumes were up 24% during the outgoing week while foreign investors made net buying of $10.4 million. She pointed out that first sessions of NA and provincial assemblies were called during the week and the election for the prime minister and president would be held on March 3 and 9, respectively. It would be followed by Senate elections later in the month.

Moody’s maintained Pakistan’s credit rating at “Caa3” with a stable outlook but highlighted liquidity and external vulnerability challenges ahead.

On the macro front, February’s Consumer Price Index (CPI) came in at 23.1%, a 20-month low. As per Pakistan Bureau of Statistics’ data, the trade deficit was recorded at $1.7 billion for February 2024, with 8MFY24 deficit at $14.9 billion, down 30% year-on-year (YoY).

Besides, the State Bank’s foreign currency reserves slid to $7.9 billion. The Federal Board of Revenue (FBR) missed the February 2024 tax collection target by Rs33 billion, however, higher receipts in previous months enabled it to meet the 8MFY24 goal.

Meanwhile, the government announced an increase of Rs4 per litre in petrol prices while diesel prices were kept unchanged for a fortnight, the JS analyst added.

Arif Habib Limited (AHL) reported that the stock market continued its positive momentum during which it surged from 62,000 to 65,000 points, reflecting investor optimism amid the government formation process. With the swearing in of NA members and the impending election for the prime minister on Sunday, the PSX responded positively to expectations of political stability and the government formation.

Read Easing political noise propels PSX higher

On the economic front, the forex reserves decreased by $63 million to stand at $7.95 billion. Additionally, the FBR collected Rs681 billion during February against the target of Rs714 billion, showing a shortfall of Rs33 billion. Pakistani rupee closed at Rs279.19 against the US dollar with the appreciation of Rs0.17, or 0.06% WoW.

Foreign buying continued during the week under review, which stood at $10.5 million compared to net buying of $2.9 million in the previous week, AHL added.

Published in The Express Tribune, March 3^rd, 2024.

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