On Thursday, the Pakistan Stock Exchange (PSX) benchmark index surpassed the 44,000 milestone after 14 months, experiencing a substantial surge of over 600 points after a two-day decline. The PSX website reported the KSE-100 index closing at 44,178.85 points, reflecting a commendable rise of 1.44 per cent or 626.02 points.
Market analysts attribute this rally to several pivotal factors. Firstly, the standby agreement reached with the International Monetary Fund (IMF) played a crucial role in bolstering investor confidence. This agreement significantly alleviated uncertainties, particularly the risk of default, providing Pakistan with the opportunity to focus on its fiscal policies.
Additionally, the disbursement of payments to independent power producers (IPP) contributed to the positive momentum in the market. The government allocated around Rs140 billion to the IPPs, allowing them to distribute higher dividends. Consequently, this development led to a surge in the shares of these companies.
Moreover, the cement sector experienced a notable upturn due to a decline in international coal prices. Lower coal prices benefit the cement industry as coal is a primary fuel for cement production.
Prominent market experts, such as Salman Naqvi, the head of research at Aba Ali Habib Securities, express optimism about the market’s potential. Naqvi anticipates that the index could potentially reach a range of 45,000 to 46,000 points. However, he cautions that the rise may not be consistently linear, considering the recent slump following a historic bull run on Monday.
On Monday, the stock market witnessed significant gains as Pakistan secured a $3 billion short-term financial package from the IMF. This package provided significant relief to the struggling economy, which was facing a severe balance of payments crisis and diminishing foreign exchange reserves.
The funding, allocated over nine months, surpassed expectations and provided respite as Pakistan awaited the release of the remaining funds from a previous bailout package agreed upon in 2019. The IMF board is scheduled to approve the deal in July.
