- The market opens with a sharp decline of 600 points due to political concerns.
- Positive macroeconomics, IMF optimism and falling bond yields are driving an uptrend.
- October C/A surplus of $349 million; reserves at a 2-year high are boosting sentiment.
Stocks posted modest gains on Monday after a rollercoaster day, driven by political jitters from the Pakistan Tehreek-e-Insaf’s (PTI) “do or die” march to Islamabad, supported by macroeconomic resilience.
The Pakistan Stock Exchange’s (PSX) benchmark KSE-100 Shares Index gained 281.55 points, or 0.29 per cent, to close at 98,079.78 points.
The supreme index surged 1,519.24 points, or 1.55 percent, to hit an intraday high of 99,317.47 points after falling more than 600 points just after the opening bell.
Muhammad Saad Ali, director of research at Intermarket Securities, noted: “Politics is a major factor in the decline in early trading. »
“Profit-taking started on Friday after the index almost reached 100,000 points. Additionally, it is refinancing week for futures investors, which could lead to increased selling activity,” a- he added.
The market’s resilience was driven by increased political uncertainty and tight security measures in major cities, including Islamabad and Lahore.
Market participants attributed the gains to strong fundamentals, improving macroeconomic indicators and optimism over falling lending rates.
Analysts have pointed to several factors contributing to the market’s continued rise.
Despite these pressures, the market remained optimistic due to falling fixed income yields, a current account surplus (C/A) of $349 million in October and positive remarks from the International Monetary Fund ( IMF) after a recent review.
Tahir Abbas, Head of Research and Investment Strategy at Arif Habib Limited, highlighted the attractiveness of the market in terms of valuation: “The valuation is extremely attractive. In the current scenario of falling interest rates, fixed income returns are becoming completely unattractive and are expected to fall into single digits. »
“Furthermore, a major reason for this positive sentiment is that as long as our macroeconomic indicators remain stable or improve, the market will continue to maintain positive momentum,” he added.
Earlier this month, the SBP cut its policy rate by a record 250 basis points to 15%, and further cuts are expected as inflation figures fall.
Among notable developments, the State Bank of Pakistan (SBP) raised Rs 350 billion in an auction of Pakistan Investment Bonds (PIB), the yields of which fell by up to 19 percentage points. base.
The government raised 350 billion rupees through the auction of Pakistan Investment Bonds (PIB), surpassing the 300 billion rupees target, as yields on five- and 10-year securities fell to their lowest levels since March 2022.
The threshold yield on the two-year zero-coupon bond decreased by 19 basis points (bps) to 13.0%. At the same time, the threshold yield on three-year bonds remained unchanged at 12.5%.
Yields on five- and 10-year bonds also fell, falling by 9 basis points and 14 basis points, respectively, to 12.7% and 12.838%.
The current account surplus added another level of confidence, with the State Bank of Pakistan (SBP) reporting a surplus of $349 million for October 2024 – the third consecutive monthly surplus.
This improvement is attributed to a 7% month-on-month and 24% year-on-year increase in remittances. Foreign exchange reserves also reached their highest level in two years, boosting confidence in the country’s economic recovery.
In total, the current account surplus for the first four months of FY25 stood at $218 million, compared to a deficit of $1.53 billion during the same period last year .
Foreign direct investment (FDI) also showed robust growth, increasing 32% year-on-year to $904.3 million in the July-October period.
The month of October saw a slight decline in FDI compared to the same month last year. Total foreign investment flows for the period reached $1.242 billion.
With reserves expected to exceed $11 billion in the coming weeks, local mutual funds have actively shifted their investments from fixed income to stocks, driving the benchmark index up 20% since september.
The PTI protest, led by party leaders and supporters, comes with demands to revoke the 26th constitutional amendment, restore democracy and release detained political workers. Despite the government crackdown, caravans of protesters headed toward Islamabad, defying court orders and tight security measures.
The timing of the protest coincides with the upcoming visit of the Belarusian president and heightened political tensions across the country. Communications services in major cities, including Karachi and Islamabad, were disrupted as part of government measures to contain the protests.
The KSE-100 index, which briefly crossed the 99,000-point mark in intraday trading last week, remains on track to hit all-time highs.
With favorable economic indicators and robust liquidity, stocks continue to present an attractive asset class for investors, maintaining their upward trajectory despite political headwinds.