The Pakistan Stock Exchange link (PSX) , abarometer to gauge economic performance, has emerged as the second bestperforming regional market in January, as it hit three-year high growth inshare prices with 16-year high trade volume and 13-year high trade value inthe last session on Friday.
At a global level, it settled on the seventh position among the bestperforming stock markets in the single month, AHL Research reported citingBloomberg.
The changes in spending patterns of individuals, coupled with reducedinterest rate, excess liquidity in the system and much improved earnings bythe companies listed at the PSX all encouraged investors to bet at thebourse and pushed share prices, volume and value to multi-year high levels.
The drop in infection cases during the second wave of Covid-19,availability of a vaccine soon in Pakistan, economic reforms, andacceleration in economic activities as depicted by growth in sales ofcement, steel, petroleum oil products, fertiliser and cars have alsosupported investment at the stock market during January.
The PSX’s benchmark KSE 100 Index increased 6%, or 2,630 points, duringJanuary and closed at near and around three-year high at 46,386 points onFriday. Trade volume (regular and futures) hit 16-year high of 1.12 billionshares turnover, while trade value (regular and futures) spiked to 13-yearhigh at Rs49.9 billion ($311 million) in the last trading session.
“In my opinion, the improved corporate performances, including increasedearnings by the listed companies for the quarter ended on December 31 (andexpansion and acquisition announcements), is the leading reason behind thesmart rally at the market,” seasoned stockbroker and businessman Arif Habibtold The Express Tribune.
Steel, cement, bank, IT and pharmaceutical sectors led the rally from thefront at the PSX, he said.
“We expect the companies would continue to post better earnings, goingforward…and support the market reaching 52,000 points level by December2021 (slightly short of the all-time high of 52,876 points hit in May2017),” he added.
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The factors which would support the stock market’s growth includeannouncement from the central bank last week that the interest rate wouldremain stable at 7% in the near term (till May), surpassing tax revenuetarget for the first seven months (Jul-Jan) of current fiscal year 2021 andreceipt of strong workers’ remittances from overseas Pakistanis at over $2billion a month for the past seven months (Jun-Dec), he said.
“All regional markets including Sri Lanka and Bangladesh are rallying dueto huge local liquidity and low interest rates. Moreover, in Pakistan,besides liquidity, the upcoming IMF agreement is also supporting equities,”said Topline Securities CEO Muhammad Sohail.
“Strong recovery in the manufacturing sector, hopes of resolution ofcircular debt, lower infection ratio, expectations of healthy earnings andstable monetary policy all contributed towards better performance of themarket,” said Pak-Kuwait Investment Company (PKIC) Head of ResearchSamiullah Tariq.
Meanwhile, AHL Research Head Tahir Abbas said, “Low interest rates alongwith economic revival, robust earnings growth and flush of domesticliquidity…improved returns against investment for January (at PSX) tohigher than average 10-year high for January (at 4.1%).”
He maintained that the State Bank of Pakistan (SBP) kept interest ratesunchanged in January with forward guidance of stable monetary policy atleast till May and any rise if needed would be gradual.
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