PSX breaches 44,000 barrier after 626-point rally

FOOLS_NIGHTMARE · Jul 6, 2023

The benchmark index of the Pakistan Stock Exchange (PSX) went past the 44,000 mark on Thursday, rising over 600 points after two days of slump.

According to the PSX website, the KSE-100 index closed at 44,178.85 points, up 1.44 per cent or 626.02 points.

Analysts attributed today’s rally primarily to a standby agreement with the International Monetary Fund and payments made to independent power producers (IPP) that boosted their shares.

“The agreement with the IMF has ended several uncertainties, including the risk of default,” Salman Naqvi, head of research at Aba Ali Habib Securities, explained while elaborating on the factors that led today’s rally.

“Pakistan now has some breathing space, and it can now concentrate on its fiscal policies,” he added.

Moreover, he said the government had paid around Rs140 billion to IPPs, following which several of them would now be able to pay high dividends.

“This is why we are seeing a rally in their shares.”

Naqvi further pointed out that positive momentum was also seen in the cement sector due to a reduction in the international prices of coal, which is used as a fuel for cement production.

Dalal Securities CEO Siddique Dalal also said the momentum in the stock market was led by the IMF agreement.

Overall, the index could reach up to 45,000 to 46,000 points but the rise would not be consistent, he predicted, recalling that it had slumped over the past two days after a historic bull run on Monday.

The sentiment has improved but inflation is also to be considered, he said, adding that the “market will not be consistent and the rise will not be constant”.

“Market trends will depend on the news we will get on daily basis,” Dalal said.

The stock market had witnessed the highest single-day gain on Monday after Pakistan secured a badly-needed $3bn short-term financial package from the IMF last week, giving the economy a much-awaited respite as it teeters on the brink of default.

The deal — subject to approval by the IMF board in July — came after an eight-month delay and offers some respite to Pakistan, which is battling an acute balance of payments crisis and falling foreign exchange reserves.

The $3bn funding, spread over nine months, was higher than expected as Islamabad was awaiting the release of the remaining $2.5bn from a $6.5bn bailout package agreed in 2019, which expired last week.