PSX may test 47,000 points level this week in positive sentiment

KARACHI: Pakistan Stock Exchange (PSX) made decent recovery last week as the central bank kept the policy rate unchanged and later clarified that that there will not be more hikes in the interest rate, besides rupee’s consistent appreciation against the US dollar and the announcement of general elections’ date.
The benchmark KSE-100 Index gained 667.64 points (+1.46 percent) on a week-on-week basis to close at 46,421.15 points from 45,753.51 points. The index shed 259.97 points (-0.56 percent) in the preceding week. However, the index has gained 4,967.17 points since the Staff Level Agreement (SLA) was signed with the International Monetary Fund (IMF) on June 30.
The bourse started the week on a positive note and gained around 50 points on Monday and 107 points on Tuesday owing to support from the swift recovery of the rupee and the central bank’s decision to leave its policy rate unchanged at 22 percent. The government’s crackdown on currency smugglers continued in a bid to stabilise the exchange rate.
However, the market lost some ground in directionless trading as the mounting debt and surging power tariff dented investors’ confidence. The bourse turned around on Thursday and gained 313 points as the Asian Development Bank forecast that Pakistan’s economy would stabilise after polls and reforms. The Election Commission of Pakistan (ECP)’s announcement that polls would be held in the last week of January 2024 also lent key support to the market. The stock market breached the 46,000-point barrier on Thursday, showing a sign of the sustained upward trend in the market.
The index extended its rally on Friday and gained 219 points, driven higher by the rupee’s continuous strengthening and $56 million increase in the country’s foreign exchange reserves.
The benchmark index is likely to test the 47,000-47,200 resistance level in the coming days. This breakthrough was driven by some positive pieces of news, which boosted market confidence. Concerns over an extended postponement of the general election have been allayed by the Election Commission’s recent declaration that the elections are scheduled for the final week of January 2024. Investors have expressed relief over this news, which has caused a spike in positive sentiment.
The market analysts attributed the market’s recovery to appreciation of the rupee, ECP’s statement about general elections and partly to a statement of Barrick Gold Corp CEO where he highlighted the newfound interest in developing the $7 billion Reko Diq gold and copper mine in Balochistan.
During the week, the rupee continued to gain ground and closed at 295 per dollar in the open market, gaining 1.6 percent on a week-on-week basis. It came as the State Bank undertook measures to enforce regulations against the unauthorized currency dealers.
On the economic front, the large-scale manufacturing sector posted a 1.1 percent year-on-year decline in output for July 2023. Though the data remained in the red for the 11th consecutive month, the pace of decline slowed down. In the treasury bills’ auction held during the week, the central bank sold three, six and 12-month treasury bills at lower yields compared to the previous auction, reflecting the market’s expectation of a decrease in inflation in the coming months. Three-month bonds attracted the most interest where yields fell by 1.71 percent. – TLTP