PSX sees big surge as year-end approaches

Investor optimism, potential rate cut, robust economic indicators power rally

KARACHI:

Pakistan Stock Exchange (PSX) on Monday experienced a remarkable surge as the year-end approached, when the KSE-100 index soared by 3,908 points, or 3.5%.

The rally was fuelled by investor optimism due to the potential for single-digit policy rate along with expectations of rationalised government spending and continuous economic reforms. The positive sentiment was further aided by a strong rupee, rising exports and declining lending rates.

During the day, the KSE-100 index reached the intra-day high of 4,071 points, before settling at 115,259 and returning to the upper end of its current range. Volumes surged to over 1 billion shares while total value amounted to Rs41 billion. Ahsan Mehanti of Arif Habib Corp commented that stocks exhibited a massive surge ahead of year-end, led by across-the-board activity, as investors weighed the finance minister's hint at a potential single-digit policy rate, rationalisation of government spending and economic reforms.

He added that a strong rupee, surging exports and falling lending rates played the role of catalysts in bullish close at the PSX. At the end of trading, the benchmark KSE-100 index recorded an increase of 3,907.82 points, or 3.51%, and settled at 115,259.

In its market review, Topline Securities commented that the PSX staged a bullish run, with the KSE-100 index reaching the intra-day high of 4,071 points and marking a day of impressive gains. The brokerage house noted that the upward momentum was fuelled by optimism surrounding the anticipated increase in equity fund allocations by local institutions ahead of new year. Adding further impetus was a statement from the finance minister over the weekend, suggesting a potential decline in interest rate to single digits.

While the ultimate decision was to be made by the monetary policy committee, the minister's remarks boosted market confidence and optimism about the economic outlook, it added. Major contributors to the index's rise were HBL, Dawood Hercules Corporation, MCB Bank, Engro Corporation and Mari Petroleum, which collectively added 1,265 points, Topline said.

Arif Habib Limited (AHL), in its report, noted that the week started on a very strong note, with the KSE-100 gaining 3.51% to close at the upper end of its current range.

Some 87 shares rose while 12 fell, with HBL (+9.81%), Dawood Hercules (+10%) and MCB Bank (+6.83%) contributing the most to index gains. On the other hand, Fauji Fertiliser Company (-0.62%), TRG Pakistan (-4.21%) and Colgate-Palmolive (-1.13%) were the largest index drags, AHL said.

It added that the federal cabinet had approved an ordinance that revised the tax structure for banks. According to the media, the new policy eliminates the ADR-related tax (10-16%) on income from government securities. At the same time, the ordinance raises the corporate tax rate for banks.

Additionally, the National Accounts Committee released economic growth numbers for the first quarter of fiscal year 2024-25 and revised rates for FY24. In 1QFY25, the growth stood at 0.92% year-on-year while the growth rate for FY24 was revised slightly downward to 2.50% from 2.52%, AHL said. JS Global analyst Muhammad Hasan Ather stated that the KSE-100's surge was driven by investors' anticipation of interest rate dropping to single digits soon.

The market was driven by year-end portfolio rebalancing and the futures rollover of approximately Rs55 billion, he said. Overall trading volumes increased to 1.06 billion shares compared with Friday's tally of 815.9 million. Shares of 465 companies were traded. Of these, 333 stocks closed higher, 84 fell and 48 remained unchanged.

Cnergyico PK was the volume leader with trading in 125.6 million shares, gaining Rs0.92 to close at Rs7.44. It was followed by WorldCall Telecom with trading in 111.5 million shares, gaining Rs0.12 to close at Rs1.83 and The Bank of Punjab with 84.2 million shares, gaining Rs0.99 to close at Rs10.47.

During the day, foreign investors sold shares worth Rs178.5 million, the National Clearing Company of Pakistan reported.