KARACHI: Pakistan’s currency and stock markets closed weekend trading on a high note, equity analysts and traders said on Friday, amid a prevailing bullish sentiment fueled by a crackdown on dollar smugglers and restrictions on the Afghan transit trade.
The KSE100 index, the key stock index of the Pakistan Stock Exchange (PSX), rose above 50,000 points after six years to close at 50,731 points.
The bullish sentiment at the stock market, according to the analysts, was backed by inflows coming from the investors, who previously invested in dollars.
“Inflows have been redirected toward the stock market following regulatory actions taken against the hoarding of dollars, which had previously driven dollarization of the economy,” Shahid Ali Habib, CEO of the Karachi-based Arif Habib Limited (AHL) brokerage house, told Arab News.
Habib said the expected interest rate cut in the upcoming monetary policy statement at the end of this month and a lackluster performance of the real estate sector, where most of the investors had parked their money, also contributed to the bullish trend.
Ali Nawaz, CEO of Chase Securities, agreed with Habib saying the recent surge at the PSX could be attributed to a decline in petrol prices, which sparked hopes that inflation had reached its peak and the country might announce interest rate cuts in the near future.
“The crackdown on smuggling and [restrictions on] the Afghan transit trade have bolstered the currency, fostering confidence in the economy,” Nawaz told Arab News.
The interim Pakistani government recently announced measures to tighten control on the Afghan transit trade and imposed 10 percent processing fees on several goods. It banned the trade of more than 210 items, including cloth and all kinds of tyres.
Pakistan’s central bank will convene a meeting of its Monetary Policy Committee (MPC) on October 30, but a majority of analysts expect the policy rate to remain unchanged, if not cut.
A survey conducted by Topline Securities on Friday showed that 70 percent of participants expected policy rate to remain unchanged at 22 percent, while 27 percent participants expected it to drop by 25-100 basis point (bps). Only 3 percent expected the policy rate to increase.
Equity analysts credited the improving current account deficit and the arming up of Pakistan-China relations for the boost in investor confidence at the stock market.
“Stocks closed higher amid robust economic data on $8 million current account deficit that fell by 98 percent on an annual basis in September 2023,” Ahsan Mehanti, a senior equity analyst, told Arab News.
“Improving Pak-China relations played a catalyst role in the bullish close.”
The South Asian country posted a current account deficit of $8 million in September which was 98 percent lower than the deficit of $360 million recorded in the same month last year. The fall in the deficit was primarily due to a 14 percent decline in Pakistan’s imports and a slight increase in exports at 1 percent, according to the central bank data.
Pakistan’s current account deficit in the first quarter of current fiscal year decreased by 58 percent to $947 million, compared to a deficit of $2.26 billion during the same period last year.
During the week, Pakistan’s national currency also strengthened against the US dollar, except for Wednesday when it fell after 28 consecutive bullish sessions by 1.16 percent and the greenback closed at Rs280.29.
However, the rupee recouped its value on Thursday and the dollar closed at Rs278.80 in the weekend trading session on Friday.
The rupee has gained its value by around 9 percent in the interbank market since September 4, days after Pakistan’s army chief, General Syed Asim Munir, in a meeting with country’s top businessmen assured of “transparency” in dollar exchange and interbank rates.
Analysts expect upbeat corporate results, attractive valuations and a successful review of the $3 billion International Monetary Fund (IMF) bailout facility to contribute to a more positive capital market sentiment.
