PSX hits new dizzying heights, tests 96,000 resistance level on strong macros

• Investors buoyed by macroeconomic strength.
• Telecom, banking, and energy sectors drive gains.
• Hascol, Waves, and TPL Properties most actively traded.

Capital market continued its record-breaking streak on Tuesday, reaching an all-time high after briefly breaching 96,000 points psychological barrier, with investors buoyed by encouraging macroeconomic developments and policy clarity from the finance minister.

This marks a continuation of Monday’s rally, as the Pakistan Stock Exchange's (PSX) KSE-100 Shares Index soared by 860.99 points or 0.91% to hit an intraday high of 95,856.66. 

During intraday trading, euphoric investors pushed the apex index to 96,036.48 points, but late profit-taking prevented the market from sustaining that level.

The session began at the previous close of 94,995.67, maintaining positive momentum fuelled by strong performances in key sectors, including telecommunication, banking, and energy.

Stocks like Hascol Petroleum, Waves Home Appliances, and TPL Properties are among the most actively traded, with significant gains reflecting retail and institutional participation.

Investor sentiment was lifted by Finance Minister Mohammad Aurangzeb’s assurance that the International Monetary Fund’s (IMF) recent visit posed no threat to Pakistan’s $7 billion loan programme.

He confirmed that there were no discussions of additional taxes, particularly for the salaried class or manufacturing sector.

Muhammad Saad Ali, Director Research at Intermarket Securities Ltd, commented, “Conclusion of IMF mission visit – without the IMF demanding new tax measures or mini-budget – is major positive in helping the market to continue the rally.”

"Liquidity in the market is very strong with institutional investors being net buyers given interest rates have come off sharply and are likely to fall further."

"Market so far not much worried about the PTI protest later in November,” he added.

Adding to the optimism, the government announced a landmark decision allowing Exploration and Production (E&P) firms to sell 35% of future gas discoveries to the private sector, a move aimed at mitigating circular debt in the energy sector.

The Implementation Framework for the amended E&P Policy 2012 will soon be presented for final approval, providing clarity and opportunities for private-sector involvement.

The technology sector also contributed to the positive market outlook, with remittances from information and communication technology (ICT) exports rising 34.9% year-on-year to $1.206 billion during July-October 2024. 

In October alone, export remittances reached $330 million, marking a 38.6% increase compared to the same month last year.

Sana Tawfik, Head of Research at Arif Habib Limited, highlighted the critical role of improving macroeconomic indicators, such as inflation, in sustaining the bullish market. “Key indicators, such as inflation, are showing positive trends. Inflation is projected to average around 7.5% for FY25," she said. 

"For November 2024, it is expected to fall within the range of 4.5% to 5%. This represents a significant decline," she noted.

The current account surplus added another layer of confidence, with the State Bank of Pakistan (SBP) reporting a surplus of $349 million for October 2024—the third consecutive monthly surplus. 

This improvement is attributed to a 7% month-on-month and 24% year-on-year increase in remittances. Foreign exchange reserves also reached a two-year high, bolstering confidence in the country’s economic recovery. 

Cumulatively, the current account surplus for the first four months of FY25 stood at $218 million, compared to a deficit of $1.53 billion during the same period last year.

Foreign Direct Investment (FDI) also demonstrated robust growth, increasing by 32% year-on-year to $904.3 million during the July-October period. 

October saw a slight dip in FDI compared to the same month last year. Total foreign investment inflows for the period reached $1.242 billion.

With reserves projected to cross $11 billion in the coming weeks, local mutual funds have actively shifted investments from fixed-income securities to equities, driving the benchmark index’s 20% surge since September.

Ahsan Mehanti, Managing Director and CEO of Arif Habib Commodities, highlighted the positive macroeconomic factors, saying, “Stocks are bullish on reports of current account surplus." 

"Investors weighed surging foreign exchange reserves and government decisions over economic reforms for state-owned enterprises (SOE), independent power producers (IPPs), and energy pricing."

"Next triggers could be easing political noise amid protest calls by the opposition,” he added

Telecommunication and financial stocks led the rally on Monday, with PTCL (38.82 million shares traded) and Sui Southern Gas Company (48.77 million shares) among the standout performers.

Analysts attributed the ongoing rally to structural reforms, robust corporate earnings, and the absence of a mini-budget.

The IMF’s acknowledgement of Pakistan’s progress in improving its tax-to-GDP ratio, coupled with the government’s focus on state-owned enterprise reforms and IPP deals, has instilled confidence among investors.