PSX weekly roundup: stock market surges as inflation goes down

KARACHI: This week, Pakistan’s stock market experienced a significant surge, with the equity benchmark index climbing 2,240 points, or 2.8 per cent, to reach a record close of 83,531.95 points.

The positive momentum was driven by improving economic conditions, including a sharp drop in inflation and lower bond yields, which boosted investor sentiment despite continued foreign outflows, Mettis Global reported.

Stock market closes above 83,000 mark with 810 points hike

The rally in the stock market came on the back of several key developments. The chief among them was the recent approval of a $7 billion loan by the International Monetary Fund (IMF), which bolstered confidence in Pakistan’s economic outlook and also improved the foreign exchange reserves situation.

Additionally, the country saw a sharper-than-expected drop in inflation, which fell to 6.9 per cent in September—the lowest level in nearly four years. This inflation rate was well within the central bank’s target range of 5-7 per cent, and below market expectations of 7.5 per cent.

As a result of the improved inflation outlook, the central bank reduced yields on short-term government securities to levels not seen since early 2022. Meanwhile, foreign exchange reserves saw a notable increase, reaching $10.7 billion, the highest since April 2022, following the disbursement of over $1 billion from the loan programme.

Despite these positive developments, foreign investors continued their selling spree, offloading $26.1 million worth of stocks during the week, Mettis Global report said.

The sell-off, which has persisted for five consecutive weeks, is likely tied to the recent reclassification of Pakistan’s status from a Secondary Emerging Market to a Frontier Market, which occurred as part of a global equity index rebalancing.

The sectors most affected by foreign selling were those involved in energy exploration, fertilisers, and power generation. In the energy exploration space alone, $7.22 million worth of stocks were sold off by foreign investors, followed by $6.2 million in the fertiliser sector, and $5.96 million in power generation.

Despite this foreign outflow, local institutional investors, particularly mutual funds, stepped in to absorb the selling pressure, investing $26.14 million over the week. They directed most of their investments towards energy exploration, allocating $7.58 million to the sector.

Stock market stable despite political instability; pierces through 83,000 points

Over the course of the week, the stock market index traded within a 3,254-point range, hitting a high of 83,606 points and a low of 80,352 points. Average daily trading volume was recorded at 343.89 million shares, with a total value of Rs 16.72 billion, reflecting a slight decline in both volume and value compared to the previous week.

Despite challenges, the market’s overall positive trajectory signals renewed investor confidence in Pakistan’s economic prospects.