PSX world's best performing market

Index zooms nearly 4,750 points due to easing political noise, rate cut hopes

KARACHI:

In an outstanding performance, the Pakistan Stock Exchange (PSX) crossed the 90,000 barrier in intra-day trading as the KSE-100 index zoomed nearly 4,750 points in the outgoing week, encouraged by the mitigation of political uncertainty following the passage of 26th Constitutional Amendment Bill, robust corporate earnings and high expectations of monetary policy easing.

According to a major research house, the PSX was the world's best performing market during the week in dollar terms.

A current account surplus of $119 million for September and a 48% increase in foreign direct investment (FDI) were the major economic numbers that encouraged investors to build their stockholdings.

In another positive for the market, Pakistan requested $1 billion in climate financing from the International Monetary Fund (IMF) to fight the impact of climate change. Apart from that, the government was poised to revise agreements with the independent power producers to curb capacity payments while the Pakistani rupee remained largely stable.

Day-to-day movement of the market showed that it began the week with a remarkable recovery, fueled by encouraging economic indicators and some degree of political stability.

The KSE-100 index surged past 86,000 with gains of over 800 points, driven by across-the-board buying following approval of constitutional amendments by the National Assembly.

On Tuesday, the PSX enjoyed another bullish session as the KSE-100 rose over 400 points and closed at a record high above 86,450. The market advanced rapidly on the back of institutional buying and better-than-expected corporate earnings.

The bourse continued its bullish run on Wednesday as well with the index shooting up over 700 points and closing above 87,000 on the back of strong institutional buying of cement and banking stocks.

Next day, the market reached a historic milestone near 89,000 with a surge of around 1,750 points in the wake of increased investor interest in blue-chip shares and expectations of a deep policy rate reduction.

On the last trading day, the market maintained its sharp upward momentum, when the KSE-100 climbed over 1,000 points to close just shy of 90,000, which marked a new record high. The benchmark KSE-100 index closed at 89,994, marking a significant increase of 4,744 points, or 5.6% week-on-week (WoW).

JS Global analyst Abdul Basit, in his review, wrote that the KSE-100 remained bullish during the outgoing week, closing with a significant increase of 5.6%. Average volumes rose 52% WoW to 670 million shares.

He pointed out that the week began with the passing of the 26th Constitutional Amendment Bill in the National Assembly, securing a two-thirds majority, followed by the nomination of Justice Yahya Afridi as the next Chief Justice of Pakistan. Pakistan reported a current account surplus for the second consecutive month in September 2024, amounting to $119 million. Net FDI for 1QFY25 reached $251 million (+48% year-on-year), totaling $771 million.

Additionally, the government formally requested a climate financing fund of $1 billion from the IMF. Discussions were also underway with the Asian Infrastructure Investment Bank for credit enhancement for the planned Panda Bond, with an initial issue of up to $250 million, he said.

The government was set to modify agreements with 18 more IPPs and adopt a "take-and-pay" model. Meanwhile, the State Bank's reserves remained stable at $11 billion with a marginal increase of $18 million, the JS analyst added.

Commenting on the market's performance, AHL Research said in its report that the bourse displayed an outstanding performance, crossing the 90k barrier in intra-day trading on Friday.

It was primarily due to expectations of further policy rate cut in the upcoming monetary policy committee meeting scheduled for November 4, which bolstered investors' confidence, it said.

On the economic front, Pakistan recorded a current account surplus of $119 million for September 2024 compared to a deficit of $218 million in the same period of last year.

Power generation declined 6.4% YoY to 12,487 gigawatt hours (GWh) during September 2024 compared to 13,339 GWh in the same period of last year. Meanwhile, Pakistani rupee depreciated against the US dollar by Rs0.03, or 0.01% WoW, closing at Rs277.6.

PSX stood "as the world's best performing market in terms of US dollars", AHL said.

Sector-wise, positive contribution came from fertiliser (1,385 points), cement (929 points), commercial banks (848 points), oil and gas exploration companies (371 points) and technology and communication (238 points).

Stock-wise, positive contributors were Fauji Fertiliser Company (853 points), UBL (374 points), Engro Fertilisers (235 points), OGDC (206 points) and Lucky Cement (203 points).

Stock selling by foreigners continued during the week under review, which came in at $16.4 million compared to net selling of $11.6 million last week.