Stocks at Record High Over Easing Mini-Budget Fears

November 16, 2024 Mahi Bukhari

KSE-100 Index Soars Amid Investor Optimism

Introduction

KARACHI: The Pakistan Stock Exchange (PSX) experienced a significant rally on Friday, lifting the KSE-100 index to an all-time high. This surge was driven by reduced concerns over a potential mini-budget and growing economic optimism.

Early Fluctuations and Subsequent Rally

The day began with continuous fluctuations in early trading. However, as investor confidence grew, the KSE-100 index climbed to an intra-day peak of 95,278.27 points. Despite some profit-taking later in the session, which slightly pulled back the gains, the overall momentum remained positive.

Economic Optimism Drives Growth

Economic optimism played a crucial role in the rally. Reports that the International Monetary Fund (IMF) had no concerns about Pakistan’s revenue collection targets bolstered investor confidence. Additionally, an increase of $84 million in the State Bank of Pakistan’s foreign exchange reserves, bringing the total to $11.26 billion, further supported the upward trend.

Analyst Insights

Leading analysts provided insights into the rally. Mohammad Sohail attributed the sustained upward momentum of the KSE-100 to a shift in investor focus towards equities, driven by declining returns on fixed-income securities. Ahsan Mehanti of Arif Habib Corp commented that stocks reached a new all-time high amid receding fears of a mini-budget and relief in the additional tax levy on the banking sector.

Factors Supporting the Rally

Several factors contributed to the bullish activity at the PSX:

Falling Bank Lending Rates: Lower lending rates made equities more attractive.
Rising Foreign Exchange Reserves: Increased reserves boosted investor confidence.
Rupee Stability: A stable rupee provided a favorable backdrop for investment.

Market Performance

At the close of trading, the benchmark KSE-100 index surged by 571.75 points, or 0.61%, to close at 94,763.64.

Sector Performance

Topline Securities noted that the banking sector continued to attract investor interest, particularly after the Islamabad High Court temporarily barred the government from collecting an additional tax of up to 15% from banks if lending to the private sector was below target.

In terms of traded value, leading stocks included:

Pakistan State Oil (PSO): Rs2.86 billion
Attock Petroleum: Rs2.24 billion
TRG Pakistan: Rs1.76 billion
Hub Power: Rs1.30 billion
Oil and Gas Development Company (OGDC): Rs1.29 billion

Top Contributors

The top contributors to the index in terms of points were United Bank Limited (UBL), Habib Bank Limited (HBL), and Meezan Bank, which collectively contributed 301 points.

Weekly Performance

Arif Habib Limited (AHL) highlighted that the KSE-100 gained 1.45% week-on-week, marking another week of new highs. On Friday, 59 stocks advanced while 38 declined. Key gainers included UBL (+2.24%), HBL (+2.56%), and Meezan Bank (+1.83%).

Challenges

Despite the overall positive trend, some stocks faced declines. GlaxoSmithKline (-4.2%), Millat Tractors (-1.18%), and Dawood Hercules (-0.85%) were among the top decliners.

Outlook and Strategy

JS Global analyst Mubashir Anis Naviwala suggested a buy-on-dips strategy, focusing on sectors such as banking, exploration and production, pharma, and fertilizer.

Trading Volumes

Overall trading volumes decreased to 893.2 million shares, compared to Thursday’s 1.08 billion shares. The value of shares traded during the day was Rs30.8 billion.

Market Breadth

Shares of 473 companies were traded. Of these, 204 stocks closed higher, another 204 declined, and 65 remained unchanged. WorldCall Telecom was the volume leader with 78 million shares traded, losing Rs0.04 to close at Rs1.34. It was followed by Fauji Foods with 70.7 million shares, gaining Rs1.06 to close at Rs11.61, and Hascol Petroleum with 55.5 million shares, gaining Rs0.03 to close at Rs8.24.

Foreign Investment

During the day, foreign investors were net sellers of Rs344.1 million worth of shares, according to the National Clearing Company of Pakistan Limited (NCCPL).

Conclusion

The Pakistan Stock Exchange’s record performance reflects growing investor confidence amid easing mini-budget fears and economic optimism. With strategic sector focus and supportive economic indicators, the market is poised for continued growth.

FAQs

1. What caused the recent surge in the KSE-100 index?

The recent surge in the KSE-100 index was primarily driven by reduced concerns over a potential mini-budget, increased foreign exchange reserves, and economic optimism following reports that the IMF had no issues with Pakistan’s revenue collection targets.

2. Which sectors led the rally in the Pakistan Stock Exchange?

The banking sector led the rally, benefiting from temporary tax relief granted by the court. Other sectors that attracted investor interest included exploration and production, pharma, and fertilizer.

3. What are the key factors contributing to the bullish activity at the PSX?

Key factors include falling bank lending rates, rising foreign exchange reserves, and rupee stability. These factors have collectively boosted investor confidence and driven the bullish activity at the PSX.

4. What is the outlook for the KSE-100 index?

The outlook for the KSE-100 index remains positive, with expectations for further gains. Analysts suggest a buy-on-dips strategy, focusing on sectors such as banking, exploration and production, pharma, and fertilizer.

5. How did foreign investors participate in the recent trading session?

During the recent trading session, foreign investors were net sellers of Rs344.1 million worth of shares, according to the NCCPL.