KARACHI: During Tuesday’s early trading hours, the Pakistan Stock Exchange (PSX) easily broke through the psychological barrier of 60,000 points.
The benefits resulted from large new investments made by wealthy people and institutional investors who anticipated steep interest rate decreases and cheap stock prices.
The PSX benchmark KSE-100 Index, which closed at 59,811 points on Monday, increased by 1.56%, or 934 points, before midday to reach a new all-time high of 60,745 points. Throughout the surge, penny stocks—which included steel, bank, textile, technology, and food stocks—led in volume.
Tahir Abbas, Head of Research at Arif Habib Limited, stated in an interview with The Express Tribune: “The high expectation for a steep 7% drop in the key policy rate (interest rate)
by the State Bank of Pakistan over the one-year agreed investors to take new possessions”.
“The central bank is expected to cut its key policy rate to 15% by December 2024 from record high 22% at present…ahead of a potential deceleration in inflation reading next year,” he added
Abbas mentioned that the interest rate cut expectations have made rich individuals and institutional investors relocate their investments to the stock market from fixed-income instruments these days.
Topline Securities CEO Muhammad Sohail said in a comment on X (formerly Twitter) that the PSX is breaking records and the development is “still not surprising.”
The market has gained 50% in only five months to over 60,000 points from 40,000 points. “This is the fastest 50% rise in a few months after 2004,” he wrote.
“When you have an unbelievably low valuation, a price-to-earnings ratio of 3-4%, such recovery is not at all surprising,” Sohail further commented.
Abbas further said the listed companies have booked record high growth in profit of 46% in the first nine months ending September 2023 and added that “accordingly, dividend payments by them rose robustly by 42% in the same period. This is another factor that has attracted new investment at PSX”.
The market is expecting foreign currency inflows worth around $1.5-2 billion from multilateral creditors like the World Bank and Asian Development Bank soon after the IMF executive board approves the release of its second tranche of $700 million to Pakistan in December 2023.
This is another factor for the record-buying spree at PSX.
He anticipated the market reaching 75,000-80,000 points by the end of December 2024 considering all goes well including political stability in the country, economic growth, and global commodity prices remaining stable.
