KARACHI: Growing optimism about economic stability fuelled an across-the-board value-hunting for the third straight session at the Pakistan Stock Exchange (PSX) on Thursday, tossing the benchmark KSE 100 index to an all-time high above 89,000 intraday with a gain of almost 2,000 points despite aggressive foreign selling.

Commenting on the reasons for this bull run, Topline Securities Ltd Chief Executive Officer Mohammed Sohail told Dawn that equity investors were hopeful of economic and political stability in the short run.

“Faster than expected fall in inflation and interest rate is supporting investor confidence in the stock market,” he added.

He said the stock market scaled a new peak led by aggressive institutional buying amid hope of a significant rate cut in November and December monetary policy meetings.

He added that a record volume of Rs53bn ($190m) was traded at PSX in the cash and futures market, signalling an improvement in investors’ confidence.

Investors indulge in value-hunting on IMF forecast of an early fiscal turnaround, policy rate cut hopes

The index surged to record 89,126.16, posting an intraday gain of 1,931.62 points. However, it settled at its highest-ever level at 88,945.99 after adding 1,751.45 points or 2.01pc day-on-day. This marks the fifth-largest one-day points gain in the index’s history.

Explaining the continuation of the record-setting spree at the PSX, Tahir Abbas of Arif Habib Ltd told Dawn that the equity investors were celebrating the macroeconomic stability following the release of the first tranche under the $7bn new loan programme and International Monetary Fund’s forecast of an early fiscal turnaround thanks to its tough conditions which led to improved revenues, contained expenditures, and a lower fiscal deficit during FY25.

He said the other factor that supported the bull run was a downward interest rate trajectory as bank depositors started shifting their savings into equities and mutual funds for a higher return as the State Bank of Pakistan is all set to slash its policy rate for the fourth straight time since June at its upcoming monetary policy committee meeting on Nov 4.

He said the benchmark index posted a remarkable return of 42.4pc in the current calendar year and a 9.7pc month-on-month gain.

Listing the third reason for this bullish momentum, Mr Abbas said the market’s price-to-earnings (P/E) multiple ratio stood at 4.4x, which is still lower than the five-year average of 6x even though the benchmark index closed above 88,000.

About political instability amid a new wave of protests by the PTI and lawyers against the 26th constitutional amendment, Mr Abbas ruled out any negative impact from the short- to mid-term as investors focus would remain on the government’s merit-based decisions, which put the economy on the right path leading to a sharp deceleration in inflation and interest rates boosting their confidence in the economic outlook.

Ahsan Mehanti of Arif Habib Corporation said investors expect political tension to ease and the government would expedite the privatisation process for state-owned enterprises. “Economic recovery with softening of monetary policy would raise share prices of leveraged sectors to further new highs in FY25,” he observed.

He added that surging global crude oil prices, the finance minister’s affirmations over encouraging China debt flexibility talks, and speculations over expected cuts in the interest rate also contributed to the bullish activity at the PSX.

The trading volume was up 8.34pc to 757.54 million shares, while the traded value surged 34.38pc to Rs36.04bn day-on-day.

Stocks contributing significantly to the traded volume included K-Electric (113.20m shares), Pakistan Telecom (41.10m shares), Fauji Cement (23.27m shares), TRG Pakistan (22.98m shares) and Maple Leaf Cement (22.95m shares).

The shares registering the most significant increases in their prices in absolute terms were Unilever Foods (Rs191.89), Pakistan Tobacco (Rs109.40), Philip Morris (Rs51.17), Bata Pakistan (Rs41.46) and Lucky Core Industries (Rs26.97).

The companies that suffered significant losses in their share prices in absolute terms were Rafhan Maize (Rs271.44), Nestle Pakistan (Rs156.94), Hoechst Pakistan (Rs57.24), Bhanero Textile (Rs44.84) and Ismail Industries (Rs34.37).

However, foreigners remained net sellers and offloaded shares worth $9.6m.

Published in Dawn, October 25th, 2024