PSX Surges to New Peak Above 101k

November 30, 2024 Mahi Bukhari

Surge in Banking, Oil, and Pharma Stocks; $500 Million ADB Loan Fuels Momentum

Introduction

The Pakistan Stock Exchange (PSX) has once again made headlines with a significant surge, spiking nearly 1,300 points to reach a new all-time high above 101,000. This remarkable rise has been driven by strong performances in the oil, banking, and pharmaceutical sectors, coupled with a favorable loan disbursement from the Asian Development Bank (ADB).

Factors Driving the Surge

Strong Sector Performances

The bullish momentum in the PSX has been attributed to the robust performances of key sectors. The oil, banking, and pharmaceutical industries have shown significant gains, which have been pivotal in driving the market upward.

Favorable Stock Valuations

Investors have been keenly anticipating the State Bank of Pakistan’s (SBP) policy rate announcement. The expectation of favorable stock valuations ahead of this announcement has contributed to the positive market sentiment.

Increase in Foreign Exchange Reserves

A notable boost to investor confidence has come from the $500 million loan disbursement by the ADB. This loan is part of Pakistan’s Climate Change and Disaster Resilience Enhancement Programme and has significantly bolstered the country’s foreign exchange reserves.

Easing Inflation Expectations

The easing of inflation expectations has also played a crucial role in the strong close for the benchmark KSE-100 index. Lower inflation expectations generally lead to increased consumer and investor confidence, which in turn supports market growth.

Market Highlights

Benchmark KSE-100 Index Performance

At the end of trading, the benchmark KSE-100 index recorded an impressive increase of 1,274.55 points, or 1.27%, closing at 101,357.32. This surge was driven by hefty trading volumes and significant contributions from key stocks such as Pakistan Petroleum and Pakistan State Oil.

Sector Contributions

The banking sector continued to exhibit strength, particularly following the removal of the minimum deposit rate (MDR) requirement for corporate deposits. This regulatory change has attracted considerable investor interest, further fueling the market’s upward trajectory.

Expert Analysis

Ahsan Mehanti, Arif Habib Corp

Ahsan Mehanti of Arif Habib Corp commented that the PSX’s new all-time high was led by strong valuations in the oil, banking, and pharmaceutical sectors. He noted that speculation ahead of the SBP’s policy rate announcement, along with an increase in forex reserves and a fall in government bond yields amid low inflation, served as catalysts for the record close.

Topline Securities Review

In its market review, Topline Securities attributed the positive session to the SBP receiving $500 million from the ADB for the Climate Change and Disaster Resilience Enhancement Programme. This disbursement is expected to enable the SBP to end November with reserves around $12 billion.

Weekly Performance

Topline Securities highlighted that the KSE-100 rose by 3.64% week-on-week, driven by the banking sector’s performance, a successful T-bills auction, and the ADB loan disbursement.

Arif Habib Limited (AHL) Research Report

Arif Habib Limited (AHL) noted a solid close to the week, with the KSE-100 comfortably above 100k points. They projected that inflation in November 2024 would decrease to 4.7% year-on-year, marking the lowest inflation reading since April 2018.

Trading Volumes and Values

Overall trading volumes on the day decreased to 915.5 million shares from the previous day’s tally of 1.16 billion. The value of shares traded during the day was Rs35.98 billion.

Key Contributors

Pakistan Petroleum Ltd: Rs1.93 billion
Pakistan State Oil (PSO): Rs1.88 billion
The Searle Company: Rs1.63 billion
Oil and Gas Development Company (OGDC): Rs1.53 billion
Attock Refinery: Rs1.29 billion

Top Index Contributors

Pakistan Petroleum: +2.55%
Service Industries: +10%
Bank Alfalah: +4.4%
Hub Power: -0.69%
TRG Pakistan: -2.84%
Fauji Fertiliser Company: -0.24%

Market Leaders

The Bank of Punjab: 95.1 million shares, increasing Rs0.35 to close at Rs9.20.
K-Electric: 55.5 million shares, gaining Rs0.18 to close at Rs5.58.
Sui Southern Gas Company: 44.8 million shares, gaining Rs2.57 to close at Rs28.30.

Foreign Investor Activity

During the day, foreign investors sold shares worth Rs65.8 million, according to the National Clearing Company of Pakistan Limited (NCCPL).

FAQs

1. What caused the recent surge in the PSX?

The recent surge in the PSX was driven by strong performances in the oil, banking, and pharmaceutical sectors, favorable stock valuations, an increase in foreign exchange reserves due to a $500 million loan from the ADB, and easing inflation expectations.

2. How has the ADB loan impacted the PSX?

The $500 million loan from the ADB has significantly bolstered Pakistan’s foreign exchange reserves, increasing investor confidence and contributing to the surge in the PSX.

3. What are the key sectors contributing to the PSX’s growth?

The key sectors contributing to the PSX’s growth are oil, banking, and pharmaceuticals. These sectors have shown strong performances and have been pivotal in driving the market upward.

4. What is the current status of the KSE-100 index?

The KSE-100 index recently recorded an increase of 1,274.55 points, closing at an all-time high of 101,357.32. This surge was driven by strong trading volumes and significant contributions from key stocks.

5. How have inflation expectations affected the PSX?

Easing inflation expectations have played a crucial role in boosting investor confidence, leading to a strong close for the benchmark KSE-100 index. Lower inflation expectations generally lead to increased consumer and investor confidence, supporting market growth.

Conclusion

The PSX’s recent surge to a new all-time high above 101,000 points marks a significant milestone for Pakistan’s stock market. Driven by strong performances in the oil, banking, and pharmaceutical sectors, favorable stock valuations, and increased foreign exchange reserves, the market’s bullish momentum reflects growing investor confidence and optimism about the country’s economic prospects. As the PSX continues to climb, it remains a key indicator of Pakistan’s financial health and economic stability.