Rate cut hopes, robust results power PSX rally

KSE-100 index gains 866 points, or 0.96% WoW, settles at 90,860

KARACHI:

Pakistan Stock Exchange (PSX) continued its rapid march towards north and closed just shy of the record high at 90,860 points in the outgoing week as investors highly anticipated a policy rate reduction and welcomed foreign investors' stock buying after several weeks of selling.

Economic indicators painted a positive picture as the October Consumer Price Index (CPI)-based inflation came in at 7.2%. In addition, Pakistan achieved a primary surplus of Rs1.7 trillion in the first quarter of FY25, largely due to a higher profit earned by the State Bank of Pakistan (SBP).

According to the latest weekly data, the central bank's foreign exchange reserves rose $115 million to $11.2 billion.

Among diplomatic developments, Pakistan signed memoranda of understanding (MoUs) with Saudi firms during Prime Minister Shehbaz Sharif's visit to Saudi Arabia.

In terms of foreign financing, the Asian Development Bank (ADB) was set to provide $2.75 billion to Pakistan over the next four years.

Day-to-day movement of the market showed that at the start of the week, stocks hit a new all-time high, spurred by corporate earnings and optimism about policy rate reduction early next week.

On Tuesday, the PSX surged to another record high, gaining over 650 points, as investors once again responded to strong corporate earnings and speculated about a potential policy rate cut.

After an impressive record-breaking streak, the bourse faced a challenging session on Wednesday, where investors resorted to profit-taking and pushed the KSE-100 index down by more than 550 points.

The following day, after earning the title of best-performing market by crossing the 90,000 barrier, the index ended October with a plunge of over 1,300 points, slipping just below 89,000.

In stark contrast to the previous two days' downturn, the PSX rebounded in a remarkable fashion on Friday, soaring nearly 1,900 points.

The benchmark KSE-100 index closed the week with gains of 866 points, or 0.96% week-on-week (WoW), and settled at 90,860.

JS Global analyst Abdul Basit, in his review, wrote that the KSE-100 remained bullish during the week, showing an increase of 1% WoW. Average volumes dropped 17% to 559 million shares.

After few weeks of foreign selling, the outgoing week saw a turnaround with net foreign buying of $2 million, he said.

CPI-based inflation for October 2024 came in at 7.2%, with a 2% uptick on a month-on-month (MoM) basis. The government reported a primary surplus of Rs1.7 trillion for 1QFY25, the first in two decades, driven mainly by a higher SBP profit.

In other news, Pakistan signed additional MoUs with Saudi firms during PM Shehbaz's visit to the kingdom. Pakistan was also likely to receive $2.75 billion from the ADB over the next four years, with $800 million likely to be disbursed in the current fiscal year, the analyst said.

At the T-bills' auction, the yields further declined by 64 to 120 basis points amid anticipation of a rate cut in the monetary policy meeting on November 4. SBP's reserves increased $115 million to $11.2 billion.

Lastly, the government missed the revenue collection target for 4MFY25, with a shortfall of around Rs196 billion, the JS analyst added.

Arif Habib Limited (AHL), in its report, stated that stock trading commenced on a positive note during the outgoing week on the back of expectations of a rate cut in the upcoming monetary policy along with robust financial results.

As a result, it said, the market reached an all-time high of 91,358 points in intra-day trading on October 29, 2024.

On the economic front, Pakistan achieved a budget surplus of Rs1.7 trillion, the first time since 2QFY04. In addition, Saudi Arabia agreed to invest a further $600 million in Pakistan, which took the total investment to $2.8 billion.

However, a correction was witnessed on Thursday, which was followed by a 1,893-point rally the next day, AHL said.

Sector-wise, positive contributors were exploration and production (391 points), technology (319 points), cement (244 points), oil marketing companies (189 points) and pharmaceuticals (174 points), AHL added.