PSX rose on better economic outlook

PSX rose on better economic outlook

The Pakistan Stock Exchange (PSX) rallied in a remarkable way last week as it surged to a new high of around 72,750 points as activity was fueled by Iran’s president’s visit to Pakistan and speculation about the upcoming monetary policy and new loan talks with the International Monetary Fund. Fund (IMF).

Some other major positive developments in the economy and the ongoing corporate earnings season also fueled the market rally where the KSE-100 index surged over 1,800 points.

A significant increase in Pakistan’s current account surplus, improving foreign direct investment and a surge in investment through the Roshan Digital Account (RDA) gave investors much-needed confidence in Pakistan’s economy.

As the week began on Monday, Pakistan’s stock market rose to new record highs, boosted by strong financial results and expectations ahead of the State Bank of Pakistan’s (SBP) monetary policy announcement on April 29.

The next day, the PSX was under selling pressure, which wiped out all gains made earlier in the day, due to weakening global crude oil prices, refinery shutdowns and caution ahead of monetary policy announcements.

On Wednesday, the index touched a fresh high above the 72,000-point mark on the improving economic outlook following Finance Minister Muhammad Aurangzeb’s statement that foreign exchange reserves could reach “anywhere between $9-10 billion” by the end of June.

Markets were under slight downward pressure on Thursday following institutional profit-taking in overbought stocks amid the corporate earnings season.

On Friday, the PSX surged to an unprecedented high with a massive gain of more than 750 points on the back of a favorable earnings outlook, speculation ahead of the monetary policy meeting and healthy inflows of $182 million through the RDA in March.

Overall, the benchmark KSE-100 index gained 1,833 points, or 2.58% week-on-week (WoW), and closed at 72,743.

JS Deputy Head of Global Research Muhammad Waqas Ghani, in his report, wrote that the KSE-100 index reached an all-time high close of 72,742 last week, bringing WoW’s gains to nearly 3%.

The average trading volume increased by 32% compared to the previous week while the average trading value increased by 22%.

Fertilizer stocks are the best performers, he said. The week began with the Iranian president’s visit to Pakistan where the two countries agreed to increase bilateral trade to $10 billion in the next five years and signed various agreements and memorandums of understanding (MoU) for cooperation in different fields.

He pointed out that economically, the current account for March reached a surplus of $619 million, the highest in nine years and the third highest in 20 years.

The increase was mainly due to a 31% month-on-month (MoM) increase in remittances, which usually occurs during Ramadan. As a result, the current account deficit for 9MFY24 was limited to just $508 million, a decline of 87% year-on-year (YoY).

Furthermore, SBP data showed that inflows through RDA rose to $182 million in March, marking a 29% MoM increase. SBP’s foreign exchange reserves remained stable at nearly $8 billion, added deputy research chief JS.

Arif Habib Limited (AHL), in its report, wrote that market sentiment remained positive throughout the week and the index closed at an all-time high of 72,743 points. The positivity was fueled by strong performance in certain sectors during the ongoing results season.

Expectations ahead of next week’s monetary policy decision and IMF executive board meeting helped maintain momentum in the market. In addition, the arrival of a delegation led by the president of Iran sparked the prospect of development cooperation. Meanwhile, FDI reached its highest level since June 2022 at $258 million. During the week, the rupee closed at Rs278.39 against the US dollar, depreciating by Rs0.08, 0.03% WoW.

In terms of sectors, positive contributors are fertilizer (562 points), cement (380 points), banks (348 points), exploration and production (201 points) and energy (155 points).

Foreign investors bought $3 million worth of shares during the week under review compared to net purchases of $33.9 million the previous week.