Pakistan Stock Exchange (PSX) rose to new all-time high for the second consecutive week amid expectations of a cut in the central bank’s policy rate and an increase in foreign investment in government securities, with the benchmark KSE-100 Index gaining 1,412 points (+2.11 percent) to close at 68,416.78 points.
The benchmark index has gained 3,265 points during the last two weeks. Throughout the four-day trading week, the market continued its positive momentum. Market sentiment was fuelled by promising inflation numbers and the expectation of an interest rate reversal. The headline inflation rate for March clocked in at 20.7 percent on a year-on-year basis, indicating a decline from the previous month, February, which reported a year-on-year inflation rate of 23.1 percent. The year-on-year (YoY) headline inflation touched a 22-month low, resulting in a positive real interest rate in March 2024 for the first time since December 2020.
US dollar inflows in Pakistan through Treasury bills hit a 4-year high in March 2024, with the country attracting a net inflow of $82 million last month. With a stable exchange rate and high yields, hot money has begun to return, with net inflows into T-bills from January to March 22, 2024, reaching $126 million. According to analysts, foreign investment in government treasuries is an encouraging development that is fuelling positive sentiments at the bourse.
Analysts also attributed the surge to investors’ expectations of Pakistan reaching another long-term agreement with the International Monetary Fund (IMF). The finance minister is leaving for Washington to attend the World Bank and the IMF spring meetings where he would also hold talks on a new programme.
Additionally, Pakistan’s trade deficit shrank 25% to $17 billion during 9MFY24 due to a considerable reduction in imports and an increase in exports. The trade deficit for March, however, stood higher on both yearly and monthly basis. Moreover, the State Bank of Pakistan’s reserves remained stable at $8 billion.
Foreign buying continued during this week, clocking in at $3.9 million compared to a net buy of $3.6 million last week. Major buying was witnessed in commercial banks ($2.0 million) and fertilizer ($0.9 million). On the local front, selling was reported by insurance companies ($5.6 million) followed by broker proprietary trading ($1.7 million).
Sector-wise, positive contributions came from fertilizer (478 points), commercial banks (367 points), E&P (153 points), cement (148 points), and pharmaceuticals (97 points). Scrip-wise, positive contributors were DAWH (200 points), ENGRO (157 points), EFERT (101 points), PPL (84 points), and SYS (81 points).
Meanwhile, the sectors that mainly contributed negatively were chemicals (25 points), and paper & board (21 points). Scrip-wise, negative contributions came from PTC (38 points), PAKT (19 points), COLG (17 points), PKGS (17 points), and MARI (17 points).
Arif Habib Ltd, one of the top brokerages, predicted, “In the upcoming week, we expect the market to remain positive. Developments related to SOEs (state-owned enterprises) privatisation or EFF (Extended Fund Facility) program with IMF (International Monetary Fund) will further improve market sentiment.” Furthermore, the result season is expected to commence in the upcoming week, where certain scrips are anticipated to be in the limelight amid the expectation of robust results, it added.
