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Sunday, May 26, 2024

Pakistan Stock Exchange Achieves Record High Amid Ongoing IMF Review

While the PSX reached new heights, PKR faced depreciation, reaching a five-week low at Rs287 against the US dollar in the interbank market.

The Pakistan Stock Exchange (PSX) experienced a surge in early trading hours on Tuesday, breaking the psychological barrier of 54,000 points. This achievement coincided with the ongoing review of Pakistan’s domestic economy by the International Monetary Fund (IMF) as part of the $3 billion loan program.

The PSX benchmark KSE-100 Index reached a historic high of 54,313 points, marking an increase of over 450 points or nearly one percent from the previous day’s closing of 53,860 points. The upswing was attributed to positive developments in agriculture and large-scale manufacturing, coupled with optimism surrounding the IMF talks.

However, the market faced an intraday correction, with gains reducing to 133 points, causing the benchmark index to drop below the 54,000 point mark around 1:55 pm. This correction was driven by profit-taking activities during the day.

IMF Review and Potential Loan Tranche

The positive momentum in the PSX was attributed to the “timely” IMF review and early indications of growth in agriculture and large-scale manufacturing (LSM), according to Dr. Khaqan Haasan Najeeb, a former Ministry of Finance official. The expectation of the IMF approving the release of the next loan tranche of $700 million contributed to investor sentiment. This tranche is anticipated to improve Pakistan’s foreign exchange reserves and address the increasing demand for foreign currency.

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Muhammad Sohail, CEO of Topline Securities, emphasized that despite the market’s surge to a new high, stock valuations remain attractive, with shares trading at a price-to-earnings (PE) ratio of four, compared to the usual seven to eight multiples. This attractiveness has encouraged many investors to buy stocks.

Rupee Depreciates to Five-Week Low

While the PSX reached new heights, the Pakistani rupee faced depreciation, reaching a five-week low at Rs287 against the US dollar in the interbank market. The currency’s slide was attributed to the escalating demand for the US dollar as discussions between Pakistan and the IMF explored options for securing new foreign financing to address the fiscal year 2023-24 shortfall.

The rupee’s decline by Rs1.71 in intraday trading to Rs287 compared to the previous day’s closing rate of Rs285.29 signaled increased demand for the greenback, impacting the exchange rate.