KARACHI:
The Pakistan Stock Exchange (PSX), while rapidly marching northwards in a remarkable manner, crossed the 75,000 mark and hit all-time highs during the outgoing week, led by exploration and production (E&P) sectors, of fertilizers and banks.
Emerging positive economic indicators encouraged many market players to build their positions, which fueled the widespread stock buying spree.
Among the major positives were talks between Pakistan and the International Monetary Fund (IMF) on a new, larger loan program.
A sizeable current account surplus in April and a jump in the country’s foreign exchange reserves above $9 billion along with a stable Pakistani rupee instilled investor confidence.
The market also received support from the growth in the output of large-scale manufacturing (LSM) industries and the expected large slowdown in inflation.
Daily market action showed that early in the week on Monday stocks surged to record highs by adding more than 700 points on optimism over the outcome of loan talks with the IMF.
The next day, the stock market rallied again and topped 74,500 points, where investors showed strong interest ahead of the budget announcement and in anticipation of a bigger loan package from the IMF.
The KSE-100 index recorded a U-shaped recovery on Wednesday, driven by several factors, including the Prime Minister’s announcement to privatize state-owned enterprises (SOEs), which helped the market reach new highs.
The uptrend continued the next day with the index making another high of nearly 270 points.
On Friday, the index soared to a new record high above 75,000 as investors pumped up the current account surplus and the rise in foreign reserves.
The benchmark KSE-100 jumped 2,257 points, or 3.09% week-on-week (WoW), to settle at 75,342.35.
JS Global analyst Shagufta Irshad, in her report, wrote that the KSE-100 continued its uptrend during the outgoing week and broke the 75k barrier.
“The KSE-100 index has gained 12.9k points, or 21%, so far in calendar year 2024, with banks, fertilizers and research and production sectors the key contributors,” he said.
On a WoW basis, average daily volume, however, fell 23% to 554 million shares, while average trade value fell 10% to $79 million.
Banking, E&P and fertilizer stocks continued to attract interest from foreign investors. MSCI added National Bank of Pakistan (NBP) to its Frontier Market Index, bringing the total number of stocks from Pakistan to 77.
According to a latest report, the LSM sector grew by 2% year-on-year (y-o-y) in March 2024, a positive year-on-year increase for the fourth consecutive month, the analyst said.
Meanwhile, imports of crude oil and petroleum products hit a 10-month high of $1.125 billion in April, while the current account remained in surplus for the third consecutive month in April.
Additionally, State Bank’s foreign exchange reserves were above $9 billion, up $15 million, the JS analyst added.
Arif Habib Limited (AHL), in its commentary, said market sentiment remained positive throughout the week and the KSE-100 closed at an all-time high of 75,342 points.
The market’s strong performance stemmed from optimism surrounding negotiations for a new IMF loan package, it said.
On the economic front, LSM production rose 2% YoY but declined 9.35% MoM in March 2024. Additionally, Pakistan posted a current account surplus of $491 million in April.
Secondary market bond yields recorded an all-time decline, notably down 62 basis points over 12 months, ahead of a rate cut in June 2024 at the monetary policy committee meeting.
At the sector level, positive contributions came from commercial banks (1,076 points), E&P (396 points), fertilizers (196 points), auto parts and accessories (102 points) and mechanical engineering (72 points).
Foreign investors bought shares worth $14.94 million during the week under review compared to a net purchase of $2.73 million last week, AHL added.
Published in The Express Tribune, May 19u2024.
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