The Pakistan Stock Exchange (PSX) experienced a volatile session on Friday as investor caution dictated market movements. The KSE-100 Index demonstrated significant fluctuation, initially climbing 1,232.73 points (+1.16%) to an intraday high of 107,507.69 before profit-taking reversed gains, pushing the index to an intraday low of 105,772.84.
Key Market Influences
Macroeconomic Positives vs. Investor Concerns
- Improving Indicators:
The session was supported by strong macroeconomic indicators, such as a record current account surplus and reduced inflation, signaling long-term economic recovery. - Lingering Worries:
- Global economic uncertainties and concerns over foreign outflows and rupee stability continued to weigh on sentiment.
- Profit Repatriations: The State Bank of Pakistan (SBP) reported a significant 112% YoY surge in profit repatriations by multinational firms, reaching $1.128 billion in five months, fueling concerns over dollar outflows.
- Year-End Adjustments:
Investors engaged in portfolio realignments, taking profits in blue-chip stocks following earlier rallies.
Global Consumer Confidence and Market Sentiment
The 2024 Global Consumer Confidence Index revealed growing consumer optimism, with inflation concerns at a three-year low and confidence in purchasing power, savings, and job security improving. However, this was overshadowed by concerns over domestic fiscal measures.
Impact of Policy Measures
The introduction of The Tax Laws (Amendment) Bill, 2024, proposing stringent measures against non-filers, added to market caution:
- Restrictions on Non-Filers:
- Barring large financial transactions, vehicle purchases over 800cc, real estate, and shares.
- Granting the Federal Board of Revenue (FBR) enhanced powers, including the authority to freeze assets.
- Investor Response:
These measures raised concerns over reduced liquidity and spending in the market.
Macroeconomic Developments
- Current Account Surplus:
- November’s surplus of $729 million marked the largest since February 2015, driving the five-month FY2025 total to $944 million.
- Foreign Direct Investment (FDI):
- FDI increased by 31% YoY to $1.124 billion, with inflows from China, Hong Kong, and the UK.
- Remittances:
- November remittances grew 29% YoY to $2.9 billion, totaling $14.8 billion in five months.
- SBP Policy Rate Cut:
- A 200 basis point rate cut reduced the policy rate to 13%, aiming to boost growth amidst easing inflation (4.9%, the lowest since April 2018).
Thursday’s Historic Sell-Off
The volatility followed Thursday’s steep sell-off, where the KSE-100 Index recorded a historic 4,795.32-point drop (-4.32%), closing at 106,274.97.
- Key Contributors: Heavyweights like MARI (-10%), HUBC, UBL, OGDC, and ENGRO dragged the index down.
- Redemption Pressure: Institutional profit-taking and year-end redemptions amplified the downturn.
Despite the decline, trading volumes remained robust, with 1,155 million shares traded and a turnover of Rs 56.6 billion.
Outlook
While Pakistan’s improving macroeconomic fundamentals provide a solid foundation for long-term market confidence, near-term sentiment remains cautious due to global uncertainties, fiscal constraints, and profit-taking pressures. Investors are expected to navigate the coming sessions with heightened vigilance, balancing economic optimism against external and policy-related risks.
