KSE-100 hits record high on IMF anticipation

Stock market gains 3.5% WoW on strong economic indicators, positive investor sentiment

KARACHI:

The KSE-100 index soared to an unprecedented 82,074 points in the past week, marking a robust 3.5% increase from the previous week. This bullish momentum was fuelled by positive economic developments and strong anticipation surrounding an upcoming $7 billion approval from the International Monetary Fund's (IMF) Executive Board meeting, scheduled for September 25.

A 50-basis point rate cut by the Federal Reserve further invigorated market participation across Asian markets, including Pakistan's bourse. Despite significant selling by foreign investors, domestic players remained optimistic, buoyed by favourable economic news.

Investor sentiment was strengthened by indications of economic stabilisation and hopes for additional interest rate cuts, following the government's decision to reject all bids in the recent Market Treasury Bill auction. In a notable development, Pakistan reported a current account surplus of $75 million for August 2024, attributed to robust remittances that exceeded the trade deficit. The Pakistan Bureau of Statistics (PBS) also reported a 2.4% year-on-year increase in Large Scale Manufacturing (LSM) for July 2024, signalling a recovery after a decline in June.

On the liquidity front, the State Bank of Pakistan (SBP) saw its reserves increase by $43 million this week, reaching a total of $9.51 billion. Daily trading activity began positively, with the Pakistan Stock Exchange (PSX) kicking off the week on Monday with a gain of 158.08 points, driven by an optimistic economic outlook amid rising exports and surging remittances.

The market paused on Tuesday as the nation celebrated Eid Miladun Nabi, marking the birth of the Holy Prophet Muhammad (PBUH). However, the bourse surged past 80,000 points on Wednesday, gaining nearly 1,000 points, propelled by speculation ahead of the IMF executive board meeting. Thursday saw a significant rally, supported by several favourable macroeconomic indicators, including improved consumer confidence, increased industrial output, and strong export performance. The bourse continued its upward trajectory on Friday, achieving historic performance as the KSE-100 index exceeded 82,000 during intra-day trading. Ultimately, the KSE-100 index closed the week at 82,074 points, gaining 2,741 points, or 3.5% week-on-week. JS Global's Deputy Head of Research, Muhammad Waqas Ghani, noted that the index's all-time high was achieved despite a $23 million outflow from foreign investors due to FTSE rebalancing. Positive sentiment from domestic players—driven by encouraging economic news and the impending IMF meeting—helped offset this impact.

The market's positive outlook was further bolstered by expectations of interest rate cuts following the government's rejection of Market Treasury Bill bids. According to the SBP, the current account surplus of $75 million in August was driven by remittances outpacing the trade deficit. However, this did not significantly affect the cumulative current account deficit for the second month of FY25, which stood at $171 million.

Additionally, the SBP's reserves rose by $43 million during the week, totalling $9.51 billion. Arif Habib Limited (AHL) highlighted that the KSE-100 index experienced a bullish week, driven by the anticipation of the $7 billion IMF approval and the Fed rate cut. Additionally, the Pakistani rupee appreciated against the US dollar by 0.12% at 277.8. The market closed at 82,074 points, marking an increase of 2,741 points, or 3.5% week-on-week.

Sector-wise, commercial banks, exploration and production, fertilisers, cement, and oil and gas marketing companies were notable positive contributors. In contrast, the refinery, engineering, and glass and ceramics sectors faced losses. Foreign investors sold shares worth $23 million during the week, compared to last week's net selling of $7.5 million.