Easing political jitters push Pakistan stocks past 86,000 points

Stocks surged on Monday as investors, who have been closely watching the political wrangling over judicial reforms from the sidelines, binged on an array of blue chips to make the most of the ongoing earnings season following the enactment of the 26th Amendment.

After a marathon session, the parliamentary approved the changes to the constitution, empowering the lawmakers to select the chief justice of the Supreme Court of Pakistan. A move that drew sharp criticism from opposition parties who said it was an attempt to subvert the judiciary.

The Pakistan Stock Exchange's (PSX) benchmark KSE-100 Shares Index surged 807.42 points or 0.95% to finish at 86,057 points, up from the previous session’s close of 85,250.09 points, after hitting a high of 86,172.79 points in early trade.

Of the 445 active stocks, 269 gained, 124 retreated, and 52 remained unchanged. The total turnover increased to 474.9 million from 323.9 million recorded on Friday.

Key sectors such as automobile manufacturing, cement, chemicals, commercial banks, fertiliser, oil and gas exploration (E&P) companies, oil marketing companies (OMCs), and refineries remained in the limelight.

Millat Tractors (MTL) up 5.22%, United Bank Limited (UBL) up 1.32%, and Attock Refinery Limited (ATRL) up 10.0% were the biggest contributors to index gains.

Analyst Ahsan Mehanti at Arif Habib Corp stated that stocks experienced a sharp recovery in the early session after the parliament passed constitutional amendments, thereby ending political uncertainty.

Mehanti added, "Speculation in the earnings season and easing lending rates spurred bullish activity at the PSX."

The first quarter (1QFY2024) corporate earnings season is underway with robust forecasts and bullish investors are increasingly taking positions in high-valuation sectors.

Stocks of major companies like Oil and Gas Development Company (OGDC), Pakistan Petroleum Limited (PPL), Habib Bank Limited (HBL), National Bank of Pakistan (NBP), Engro Fertilizers (EFERT), and Hub Power Company (HUBCO) topped the investors shopping list on Monday.

Sana Tawfik, an economist at Arif Habib Limited, attributed today’s rally to the renewed political clarity, indicating that stability in governance has positively impacted investor sentiment.

Investors were waiting for more clarity on the political outlook. When the political tug-of-war over the constitutional package ended with the successful enactment of the constitutional amendment, they expanded their positions, hoping for the economy to stabilise further following the newfound political stability.

Commenting on the bull run, Khurram Schehzad, CEO of Alpha Beta Core, said that it was a result of the restoration of investors' confidence, which was influenced by the successful Shanghai Cooperation Organisation (SCO) summit, the International Monetary Fund (IMF) loan deal, low inflation, and high rate-cut expectations from the central bank.

The State Bank of Pakistan's Monetary Policy Committee (MPC) slashed the key policy rate by 200bps to 17.5% from the existing 19.5%, the State Bank of Pakistan (SBP) announced on September 12, as inflation eased to the first single-digit figure in nearly three years.

Stocks have been mostly steady or positive since the approval of the IMF's long-awaited $7 billion bailout deal for Pakistan to stabilise its struggling economy.

However, the IMF has linked the success of the new programme to "sound policies and reforms" aimed at strengthening macroeconomic stability and addressing structural challenges, alongside "continued strong financial support from Pakistan's development and bilateral partners.