PSX climbs on better economic prospects

KSE-100 index surges 1,833 points, or 2.58% WoW, settles at 72,743

KARACHI:

Pakistan Stock Exchange (PSX) rallied in a remarkable fashion in the outgoing week when it soared to a new peak around 72,750 points as activity was fuelled by Iranian president’s visit to Pakistan and speculation about the upcoming monetary policy and new loan talks with the International Monetary Fund (IMF).

Some other major positive developments on the economic front and the ongoing corporate earnings season also powered the market’s rally during which the KSE-100 index soared over 1,800 points.

A significant increase in Pakistan’s current account surplus, improving foreign direct investment and a surge in investment through the Roshan Digital Account (RDA) gave investors the much-needed confidence in Pakistan’s economy.

As the week commenced on Monday, Pakistan’s stock market rose to a fresh record high, fueled by robust financial results and anticipation ahead of the State Bank of Pakistan (SBP)’s monetary policy announcement on April 29.

Next day, the PSX came under selling pressure, which wiped out all the gains made earlier in the day, caused by the weakening global crude oil prices, refinery closure and caution before the monetary policy announcement.

On Wednesday, the index touched a new peak above the 72,000-point mark over improved economic prospects following Finance Minister Muhammad Aurangzeb’s statement that foreign exchange reserves could reach “anywhere between $9-10 billion” by the end of June.

The market came under slightly downward pressure on Thursday over institutional profit-taking in overbought stocks amid the corporate earnings season.

On Friday, the PSX soared to unprecedented heights with substantial gains of over 750 points on the back of a favourable earnings outlook, speculation ahead of monetary policy meeting and healthy inflows of $182 million through the RDA in March.

Overall, the benchmark KSE-100 index gained 1,833 points, or 2.58% week-on-week (WoW), and closed at 72,743.

JS Global Deputy Head of Research Muhammad Waqas Ghani, in his report, wrote that the KSE-100 index reached an all-time high close of 72,742 during the outgoing week, taking WoW gains to nearly 3%.

Average traded volumes rose 32% compared to the previous week while average traded value increased 22%.

Fertiliser stocks were the top performers, he said. The week started with the Iranian president’s visit to Pakistan during which the two countries agreed to increase bilateral trade to $10 billion over the next five years and signed multiple agreements and memoranda of understanding (MoUs) for cooperation in different areas.

He pointed out that on the economic front, the current account for March reached a surplus of $619 million, the highest in nine years and the third highest in 20 years.

The increase was primarily due to a 31% month-on-month (MoM) rise in remittances, which typically occurs during Ramazan. Consequently, the current account deficit for 9MFY24 was restricted to just $508 million, an 87% year-on-year (YoY) decline.

Furthermore, SBP data showed that inflows through the RDA rose to $182 million during March, marking a 29% MoM increase. The SBP’s foreign exchange reserves remained stable at nearly $8 billion, the JS deputy research head added.

Arif Habib Limited (AHL), in its report, wrote that market sentiment remained positive throughout the week and the index closed at an all-time high of 72,743 points. The positivity was fuelled by strong performances in certain sectors during the ongoing results season.

Anticipation ahead of monetary policy decision and the IMF executive board meeting next week helped maintain the momentum in the market. Additionally, the arrival of a delegation led by the Iranian president sparked prospects of development cooperation. Meanwhile, FDI hit the highest level since June 2022 at $258 million. During the week, the rupee closed at Rs278.39 against the US dollar, depreciating by Rs0.08, 0.03% WoW.

Sector-wise, positive contributors were fertiliser (562 points), cement (380 points), banks (348 points), exploration and production (201 points) and power (155 points).

Foreign investors bought stocks valuing at $3 million during the week under review compared to net buying of $33.9 million in the previous week.

Published in The Express Tribune, April 28^th, 2024.

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