After enduring four consecutive weeks of decline, the Pakistan Stock Exchange (PSX) has made a remarkable turnaround, reflecting the country’s improving economic prospects and investor confidence. The benchmark KSE-100 Index surged by 700.83 points, a notable 1.55 percent increase on a week-on-week basis, closing at 46,013.48 points.
According to a report published on these pages, this resurgence in the stock market follows a period of turbulence that saw the KSE-100 Index lose the ground in the previous four weeks. The reversal has been particularly striking, with the index gaining an impressive 4,560.5 points and the rupee gaining the lost ground against the US dollar since a crackdown has been launched by the state’s agencies against elements involved in hoarding and smuggling of the dollar.
The positive sentiment at the start of the week was buoyed by several factors. Firstly, the reassurances from the army chief regarding transparency in the foreign exchange rate and efforts to revive the economy provided much-needed confidence. Additionally, expectations of a visit by the Saudi crown prince to discuss substantial investment plans and a lower-than-expected Consumer Price Index (CPI) inflation reading further fueled optimism. However, concerns over a potential policy rate hike of 150-200 basis points and the government’s failed attempts to secure relief in power tariffs from the IMF weighed on investor sentiment.
Last Wednesday saw the market rebound, primarily driven by a significant appreciation of the rupee in the open market and renewed expectations of Gulf investments, while the following day brought some hesitation due to speculation about a policy rate hike, and the week ended on a bullish note.
The anticipation of a visit by Saudi Crown Prince Mohammad bin Salman to finalize a $25 billion investment from Gulf countries under Special Investment Facilitation Council (SIFC) initiatives played a pivotal role in bolstering investor interest. Foreign investors continued to show confidence in the Pakistani market, with net buying at $0.6 million during the week. This indicates that international investors see potential in Pakistan’s economic prospects. The substantial appreciation of the Pakistani rupee in the open market, with an 8.68 percent increase, and a 0.82 percent gain in the interbank market, was significant. However, the market remained cautious, wary of a potential interest rate hike.
Notably, the treasury-bills auction saw the most interest in three-week papers, with yields surging by 1.62 percent, driven by expectations of a policy rate hike. In addition, the reserves of the State Bank declined by $70 million to $7.8 billion due to debt repayments, adding another element of caution. The Pakistan Stock Exchange’s impressive rebound reflects a complex interplay of economic factors, including currency appreciation, potential foreign investments and interest rate expectations. While optimism prevails, investors remain watchful of upcoming economic decisions that could impact the market’s trajectory in the coming weeks.
