PSX gains 700 points on Re’s appreciation, FDI hopes

KARACHI: Pakistan Stock Exchange (PSX) reversed its losing-run after going down for four weeks in a row amid rupee’s significant appreciation and expectation of a massive foreign direct investment in the country, with the benchmark KSE-100 Index gaining 700.83 points (+1.55 percent) on a week-on-week basis to close at 46,013.48 points.
The KSE-100 Index shed 2,358.56 points (-4.95 percent), 547.28 points (-1.14 percent), 205.91 points (-0.43 percent) and 161.31 points (-0.33 percent) in the preceding four weeks. The KSE-100 Index has gained 4,560.5 points since the Staff Level Agreement (SLA) was signed with the International Monetary Fund (IMF) on June 30.
The market opened the week positively on Monday on the back of assurances by the army chief regarding ensuring transparency in the foreign exchange rate and efforts to revive the economy. The KSE-100 Index gained 394.77 points. Other factors for this surge were expectations of the Saudi crown prince’s visit to Pakistan to discuss big investment plans with the Special Investment Facilitation Council (SIFC) and a lower-than-expected Consumer Price Index (CPI) inflation reading.
However, the benchmark index retreated on Tuesday as it lost the previous day’s momentum despite hopes of Pakistan receiving billions of dollars in investment from Gulf countries. Factors like a possible policy rate hike by 150-200 basis points and failed attempts on part of the government to persuade the International Monetary Fund (IMF) for a relief in power tariffs dented investors’ sentiment.
The market rebounded on Wednesday in the wake of a significant rupee appreciation in the open market. The index surged over 300 points, driven also by strong expectations of Gulf investment in the country. The market ended slightly lower in a range-bound session on Thursday, haunted by the talk of a hike in policy rate in the upcoming monetary policy meeting. However, the index ended the week on a bullish note. Optimism regarding the potential visit of Saudi Crown Prince Mohammad bin Salman to Pakistan to finalise $25 billion in investment from Gulf countries under SIFC initiatives bolstered investors’ interest.
Foreigners’ buying continued during the week under review, which came in at $0.6 million compared to net buying of $3.3 million last week.
The Pakistani rupee appreciated last week by Rs29 (+8.68 percent) in the open market and Rs2.52 (+0.82 percent) in the interbank market. The market remained somewhat unaffected, fearing a hike in interest rate on September 14. The latest treasury-bills auction on Thursday last witnessed a sharp increase in the cut-off yields, reaching 24.5 percent, 24.78 percent, and 25.06percent for three, six, and 12 months respectively. This showed a rise of 162bps for 3 months and 213bps for 12 months as compared to the last auction held on August 23. This indicates that the market is pricing in a higher interest rate scenario in the near future.
Besides, in the treasury-bills’ auction, three-week papers attracted the most interest where yields surged 1.62% due to anticipation of a policy rate hike. Furthermore, State Bank’s reserves declined by $70 million to $7.8 billion on account of debt repayments, the JS analyst added. – TLTP