Profit-taking drags PSX from 99,300 to modest close in volatile trading session

Political concerns and profit-taking weigh on PSX, but macroeconomic strength supports recovery

DTD-November 25, 2024

2 minutes read

PSX opens in green, KSE-100 surges over 900 points — Pakistan Stock Exchange Opens Strong with 786-Point Gain

KARACHI: Stocks recorded modest gains on Monday after a day of fluctuating movement, driven by political uncertainty from the Pakistan Tehreek-e-Insaf (PTI) party’s “do-or-die” march toward Islamabad, coupled with resilience in the country’s macroeconomic indicators. The Pakistan Stock Exchange’s (PSX) benchmark KSE-100 Shares Index gained 281.55 points, or 0.29%, to close at 98,079.78 points. The index saw significant volatility, surging by 1,519.24 points, or 1.55%, to an intraday high of 99,317.47 points, after a drop of over 600 points at the opening bell.

Market analysts noted that the early dip was primarily driven by political concerns, with profit-taking following the index’s near-reach of 100,000 points the previous week. The current week is also a rollover week for futures investors, which typically leads to increased selling activity. Despite this, the market maintained its upward momentum, supported by improving macroeconomic indicators, including a current account surplus and positive remarks from the International Monetary Fund (IMF).

Analysts highlighted the attractiveness of the market’s valuation, especially amid falling interest rates and declining fixed-income returns, which are leading investors to seek better returns in equities. The recent reduction in the State Bank of Pakistan’s (SBP) key policy rate by 250 basis points to 15% has added to the optimism, with further cuts expected as inflation decreases.

One of the standout developments was the SBP’s successful auction of Pakistan Investment Bonds (PIBs), where the government raised Rs350 billion, surpassing the target of Rs300 billion. Yields on these bonds fell to their lowest levels since March 2022, signaling confidence in the country’s economic stability. The current account surplus of $349 million in October, the third consecutive monthly surplus, added further confidence, bolstered by a significant increase in remittances and foreign exchange reserves reaching a two-year high.

Foreign Direct Investment (FDI) showed robust growth, rising by 32% year-on-year during the July-October period, reaching $904.3 million. October FDI showed a slight dip compared to the previous year, but total foreign investment inflows for the period amounted to $1.242 billion, underlining the positive sentiment surrounding Pakistan’s economy. The country’s foreign reserves are expected to surpass $11 billion in the coming weeks, which has spurred local mutual funds to shift investments from fixed-income securities to equities, contributing to the benchmark index’s 20% surge since September.

Meanwhile, the PTI protest, led by party leaders and supporters, has escalated tensions as they demand the repeal of the 26th Constitutional Amendment, the restoration of democracy, and the release of detained political workers. Despite the government’s crackdown, caravans of protesters have continued to move toward Islamabad, defying court orders and stringent security measures. The protests coincided with the upcoming visit of the Belarusian president, further intensifying political tensions across the country. Communications services in major cities, including Karachi and Islamabad, have been disrupted as part of government efforts to contain the demonstrations.

Despite the political challenges, the KSE-100 Index remains on track to reach historic highs, driven by favorable economic indicators, strong liquidity, and a shift in investor sentiment towards equities. The market’s ability to maintain its positive trajectory in the face of political uncertainty signals a continued confidence in the country’s economic recovery.

DTD-November 25, 2024

2 minutes read