PSX surges 1.8% in turbulent week

Positive economic signals counter political noise as index adds 2,025 points

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KARACHI:

Pakistan Stock Exchange (PSX) ended the week on a highly positive note as the KSE-100 index surged 2,025 points, or 1.8%, compared to the previous week and settled at 115,272 points.

The rally was driven by value investors, who capitalised on the opportunity provided by last week's dip, and the optimism following restoration of some degree of political stability.

Despite volatility fueled by earlier political noise and rising crude oil prices, key economic developments provided much-needed support. Pakistan posted a current account surplus of $582 million for December 2024, bringing the half-yearly figure for FY25 to $1.2 billion.

The UAE's rollover of $2 billion worth of deposits and the raising of Rs385 billion via Pakistan Investment Bond's (PIB) auction, where yields dropped 19 to 61 basis points, further stabilised the economic outlook. Meanwhile, the State Bank of Pakistan's (SBP) reserves rose $30 million to $11.7 billion.

However, challenges persisted, including a 3.8% year-on-year (YoY) drop in large-scale manufacturing (LSM) output for November 2024.

Average daily market trading volumes dropped 28.7% WoW to 558 million shares, while average traded value rose slightly by 1.1% to $115.8 million.

On a day-on-day basis, the PSX entered the week with renewed optimism as investors showed a strong commitment to the market, driving the benchmark KSE-100 index higher by 983 points on Monday. The strong performance was also fuelled by Finance Minister Muhammad Aurangzeb's assertion in an interview with Bloomberg TV that the government remained optimistic about meeting the International Monetary Fund's (IMF) loan terms.

On Tuesday, the PSX extended gains, when the KSE-100 index closed up 574 points, driven by easing political uncertainty, rising global oil prices and expectations of a reduction in policy rate by SBP.

The following day, investors consolidated their positions in a volatile trading session, influenced by caution ahead of SBP's policy rate decision and the uncertain fate of talks between the government and the opposition. The market recorded a decline of 308 points, which was described as a correction that came after a three-day bull run.

On Thursday, the stock market kept a downward trend, weighed down by weak economic indicators and concerns over LSM contraction, which declined 1.3% during July-November 2024. Expectations of a cautious monetary policy stance and rupee instability added to the bearish activity, pulling PSX down by 659 points.

The bourse concluded the week on a high note, rallying 1,435 points, or 1.26%, as the conviction of former prime minister Imran Khan in a real estate case did not dampen investor confidence. The bullish momentum helped the KSE-100 gain 1.8% week-on-week (WoW), which reflected its recovery from last week's losses.

Arif Habib Limited (AHL), in its commentary, wrote that the market experienced volatility throughout the week, primarily driven by political uncertainty and escalating crude oil prices.

However, on the economic front, positive developments provided some support. Key indicators showed improvement with the December 2024 current account posting a surplus of $582 million, taking the total for 1HFY25 to $1.2 billion.

In addition, cut-off yields in the PIB auction dropped 19 to 61 basis points. The UAE also played a supportive role by rolling over $2 billion worth of deposits with the SBP for another year, contributing to stability of the external account.

Sector-wise, positive contribution came from commercial banks (619 points), power generation (357 points), pharmaceuticals (320 points), cement (199 points) and technology and communication (195 points).

Stock-wise, positive contributors were UBL (427 points), Hub Power (360 points), Mari Petroleum (120 points), The Searle Company (100 points) and Lucky Cement (97 points).

Meanwhile, scrip-wise negative contributions came from OGDC (64pts), PPL (53pts), PABC (31pts), AKBL (30pts), and JDWS (23pts).

Foreigners' selling continued during the week, which came in at $8.7 million compared to net selling of $5.7 million last week.

JS Global analyst Abdul Basit commented that the KSE-100 index experienced mixed trends during the week and closed up 2% WoW.

Going forward, he said, Pakistan was preparing to launch Panda bonds with an initial target of $200-250 million, aimed at supporting the external financing. Additionally, the World Bank has pledged to provide $40 billion to Pakistan over the next 10 years under the Country Partnership Framework.