Despite the political noise and economic worries that make headlines every other day, the Pakistan Stock Exchange (PSX) broke all previous records and touched an all-time high of over 100,000 points on Thursday.
The PSX’s benchmark KSE-100 Index rose 1,077.25 points or 1.09 percent to 100,346.50 points during intraday trading, with expectations of a further rise.
Market experts have attributed this historic achievement to several factors, including the government’s unwavering commitment to implementing reforms.
The KSE-100 index’s historic milestone reflects a 60% year-to-date gain, driven by a combination of 47% capital gains and 13% dividend yield.
Major contributing sectors include commercial banks, fertilizers and oil and gas exploration, while major stocks such as Fauji Fertilizer and United Bank Ltd played a pivotal role.
To uncover other reasons, we consulted analysts to better understand the factors that pushed the market to reach this historic milestone.
“Scoring Improvements”
Economist Khurram Schehzad said policy efforts to turn fiscal and external accounts into surpluses and reduce the cost of doing business helped boost investor confidence.
Schehzad, who is also an advisor to Finance Minister Mohammad Aurangzeb on economic and financial reforms, said the decline in the cost of doing business was due to a sharp reduction in the policy interest rate, the stability of the rupee and the success of the IMF SBA, followed by a broader and longer agreement. IMF program.
Moody’s rating upgrades and positive economic outlook are also among the reasons for the stock’s rise, the adviser added.
“Coherence in the IMF program”
Samiullah Tariq, Head of Research at Pak-Kuwait Investment Company, said: Geo.tv that falling yields and lower inflation expectations are also boosting the market.
The analyst noted that one of the key factors behind the bullish market dynamics was the government’s consistent adherence to the International Monetary Fund (IMF) program.
Tariq further added that expectations of increased mutual fund investments in stocks contributed to the rise in the index.
“Calm down political noise, stability of the rupee”
Arif Habib Corp’s Ahsan Mehnti said stocks hit a new all-time high at the start of the rally on the PSX as investors speculated on the expected rate cut by the State Bank of Pakistan (SBP) after government Treasury yields fell nearly 70 basis points.
The easing of political noise and the stability of the rupee played a catalytic role in the PSX’s new record high, Mehnti added.
Political noise is a major factor affecting PSX. Stocks had retreated two days ago due to political instability, with the market suffering a crash of over 3,500 points after the PTI’s march on Islamabad turned violent.
However, they rebounded to climb more than 4,600 points and close at 99,269.25 on Wednesday, shortly after the party called off its protest following a government crackdown on protesters.
“Resilience in the face of uncertainty”
Muhammad Sohail, CEO of Topline Securities, reflected on the resilience of the PSX: “Seventeen months ago, when Pakistan was called a banana republic on the verge of default, the market returned 150%.
This is an unprecedented example in the history of Pakistan and global financial markets where a country on the brink of default has recovered so strongly. »
He added that Pakistan’s stock market has consistently generated an annual return of 20% over the past 25 years, highlighting its potential for sustainable growth.
Rally Determinants
Arif Habib, a prominent market expert, attributed the rise to economic improvements, noting: “Stock market confidence has increased due to lower interest rates, increased exports and increased foreign exchange reserves.
He acknowledged the continuing challenge of political turbulence, but highlighted its limited impact: “Political instability has always existed in Pakistan. »
Habib added that for sustainable growth, the government must strategize on how to increase revenue.
“Liquidity, the engine of the market”
One of the most important factors driving this rally is improving liquidity, as highlighted by Sana Tawfik, Head of Research at Arif Habib Limited.
“The liquidity factor emerges as the most important driver of the market. When interest rates were at 22%, fixed income assets like bonds were the most attractive asset class for investors. However, with the falling rates, we are now seeing a shift from funds to stocks, which has improved market liquidity.
This change, coupled with foreign capital inflows and a stable rupee, boosted investor confidence, allowing the market to reach new highs.