Shares at Pakistan Stock Exchange (PSX) reached an all-time high on Friday as the benchmark KSE-100 index crossed the 82,000 milestone.
The KSE-100 index increased by 770.68 points, or 0.95 percent, at 10:49 am to close at 82,229.96 points, up from 81,459.28 points the previous day. The index increased by 615.16 points, or 0.76 percent, from the previous level to close at 82,074.44.
The momentum was ascribed by Chase Securities’ director of research Yousuf M. Farooq to the yield decline that was announced yesterday.
He stated, “The market is anticipating a sharp decline in interest rates and inflation.” “The yield curve for government securities has kinked, with the 2-year and 5-year yields being higher than the 3-year yield.”
The three-year tenor cut-off rate for Pakistan Investment Bonds (PIB) dropped by 335 basis points Wednesday, despite the government borrowing less than half of the target.
The situation has altered due to the steep drop in interest rates and decreasing inflation. The government signaled to the financial markets that it was attempting to lower the cost of borrowing, which consumes all tax income collected in order to service its enormous debt, by rejecting all bids for the Treasury Bills auction on Wednesday.
FRIM Ventures’ chief investment officer, Shahbaz Ashraf, reported that the market had gained 2800 points, or 3.6 percent, since the previous week.
According to Ashraf, anticipation of monetary easing in November and the approval of the $7 billion Extended Fund Facility (EFF) by the International Monetary Fund (IMF) Board were the primary drivers of the “exuberant market performance.”
“The market’s PE [price-to-earnings] ratio, which is still below 4.5x compared to a historical average of 7–8x, is another crucial and significant factor,” he continued.
He stated, “The FTSE rebalancing event, which is expected to take place partially today and some in the next few weeks, remains the key risk in the near term.” “That being said, we believe there may be a chance to purchase at even more appealing prices if the market corrects as a result of the previously mentioned event.”
The trajectory was fueled by the expected IMF Executive Board approval and a “reduction in interest rates, driven by a notable drop in PIB cut-off yields in yesterday’s auction,” according to Awais Ashraf, director of research at AKD Securities, in a message to Dawn.com.
“With strong financial performance and improved solvency ratios, commercial banks led the KSE-100 index, contributing 675 points, as concerns over Non-Performing Loan accumulation eased,” the speaker said.
Analysts attributed the roughly 1,000-point increase in the PSX benchmark index on Thursday to the US Federal Reserve’s rate decrease, the September 25th IMF Executive Board meeting, and declining inflation data.
