Weekly recap: Record highs for PSX M Haris

ISLAMABAD: Despite a shortened trading week, the Pakistan Stock Exchange (PSX) achieved historic milestones, surging above 78,800 points. Investor optimism soared on news of unchanged taxes on capital gains and dividends, alongside prospects of securing a new IMF loan agreement.

The PSX gained over 2,100 points, buoyed by stable foreign exchange reserves exceeding $9 billion and a steady Pakistani rupee against the US dollar. Additionally, Pakistan’s current account deficit narrowed significantly in the July-May period of 2023-24, contrasting with a notable rise in the Sensitive Price Indicator, indicating short-term inflation trends.

In May 2024, Pakistan’s real effective exchange rate (REER) depreciated by 3.62%, boosting export competitiveness but increasing import costs. The market saw dramatic day-to-day movements: reopening with a remarkable 2,100-point leap on Thursday to reach an unprecedented 78,802 points, driven by robust banking sector performance and positive economic forecasts, including Fitch Ratings’ optimistic outlook on IMF negotiations.

However, volatility ensued the next day as profit-taking on overbought stocks tempered the rally, resulting in the KSE-100 index closing at 78,810 points. This marked a significant weekly increase of 2,104 points or 2.74%.

Topline Securities attributed the market’s upward trajectory to the fiscal year 2024-25 budget, which maintained tax stability for equity-related incomes, bolstering investor confidence. The anticipation of an IMF deal, supported by Fitch Ratings’ endorsement of Pakistan’s fiscal measures, further underpinned market sentiment.

Arif Habib Limited noted the week’s historic highs, with the PSX achieving record levels in just two trading sessions. Investor optimism persisted amid expectations of an IMF program, declining inflation, favorable interest rates, and a shift from fixed income to equities. By week’s end, market capitalization hit a record Rs10.55 trillion.

Sector-wise, commercial banks, power generation, and fertilizers made significant positive contributions, while cement, technology, and oil sectors experienced setbacks. Noteworthy stock performers included United Bank Limited, Hubco, MCB Bank, Habib Bank Limited, and Bank AL Habib.

Foreign investor activity saw a turnaround with net purchases amounting to $0.6 million, a shift from the previous week’s net selling of $5.8 million.

Throughout the week, the State Bank of Pakistan reported an increase in foreign exchange reserves to $9.1 billion, maintaining stability with the Pakistani rupee at 278.5 against the US dollar.