As shares of the Pakistan Stock Exchange (PSX) surged more than 900 points on Wednesday, bulls maintained their stampede, with analysts attributing the gains to improvements in economic statistics.
The benchmark KSE-100 index increased by 1,031.13 points, or 1.3%, from its previous closing of 79,491.13 points at 3:20 pm to 80,522.26 points. At 80,461.33, the index finally closed, up 970.20, or 1.22 percent, from the previous level.
According to Awais Ashraf, director of research at AKD Securities, “expectations of the IMF Executive Board’s approval of the US$7 billion Extended Fund Facility, coupled with improvements in key economic fundamentals” are driving investor sentiment.
The International Monetary Fund had earlier announced that the Fund’s board will convene on September 25 to talk about the Pakistan loan facility.
The administration led by Prime Minister Shehbaz Sharif had originally anticipated reaching an agreement with the Fund in August following the lender’s approval of the 37-month program that was decided upon in July. To satisfy the demands of the international lender, the nation also increased energy costs and increased its tax revenue objective by a record 40 percent.
He emphasized that the State Bank of Pakistan (SBP), which presently “maintains a positive real interest rate of 7.9pc,” is more likely to continue its aggressive monetary easing in light of the drop in oil prices.
In response to calls for a significant rate reduction, the State Bank of Pakistan (SBP) stated on September 12 that it would be reducing its key policy rate by 200 basis points (bps), to 17.5pc from 19.5pc.
“Mari Petroleum Company Limited contributed 321 points, following its second trading session after a 900pc bonus adjustment,” Ashraf said in reference to the index’s upward trajectory.
The surge was linked by Raza Jafri, CEO of EFG Hermes Pakistan, to “the recent interest rate cuts and current account surplus being reported for August.”
He continued, “A few stocks that have seen passive selling as a result of the FTSE downgrading Pakistan to Frontier Market status have also seen their entire supply being absorbed.”
Research director at Next Capital Limited Shahab Farooq said that while the market was still concerned about the FTSE rebalancing, good news about the IMF’s Executive Board meeting had improved investor mood.
He added his optimism was bolstered by the Asian Development Bank’s guarantee of a $2 billion loan and projections of inflation to be less than 8 percent in September.
He continued, “The market outlook is positive with the expectation that foreign selling related to rebalancing will end this week.”
Topline Securities, a trading firm located in Karachi, stated in a report that Pakistan had “reverted back to” a surplus of $75 million in August following three months of consecutive current account deficit (CAD).
It stated, “Remittances, which came in at $2.9 billion, up [by] 40 percent [year-over-year], are the reason for the improvement in the current account.”
