Pakistan Stocks Take 1,000-Point Jump on Falling Inflation

Pakistan Stocks Take 1,000-Point Jump on Falling Inflation – On Friday, Pakistan stocks experienced a dramatic surge, with the benchmark KSE-100 index of the Pakistan Stock Exchange (PSX) leaping by 1,000 points, driven by positive investor sentiment linked to a significant drop in inflation.

The KSE-100 index closed at 75,878 points, up from the previous day’s closing of 74,878 points.

Analysts at Topline Securities noted that the Pakistan stocks observed a strong session, with the index gaining 1.34% to close at the 75,878 level. This upward movement was particularly notable as the market had seen a decline of 1,100 points from the beginning of the week to Thursday’s close.

Investor of Pakistan stocks interest was notably fueled by expectations of a decrease in the Consumer Price Index (CPI) inflation figures for May. The CPI inflation number, due to be released shortly, is anticipated to show a month-on-month decline to between 13% and 13.5%, down from 17.3% in April 2024. This expected drop in inflation has buoyed market confidence and spurred buying activity.

Significant contributors to the index’s rise included major companies such as Systems Limited (SYS), Hub Power Company (HUBC), Meezan Bank Limited (MEBL), Engro Corporation (ENGRO), Fauji Fertilizer Company (FFC), and MCB Bank (MCB), which collectively added 548 points to the index. The day’s trading volume and value were robust, with 520.7 million shares traded, amounting to a total value of Rs20.42 billion. K-Electric Limited (KEL) led the trading volume with 61.9 million shares exchanged.

Over the past week, the KSE-100 Index of Pakistan stocks increased by 6.72% on a week-on-week basis. This impressive gain is attributed to the visit of an International Monetary Fund (IMF) team to Pakistan and subsequent news of significant progress towards reaching a staff-level agreement. The positive outcome of these talks has bolstered investor confidence.

Additionally, foreign corporate buying has provided further stimulus to the market, with a net purchase of $34.5 million by the end of yesterday, supported by a stable currency and expectations of a new bailout from the IMF.

Several major economic events also influenced market dynamics during April. These included a CPI inflation rate of 17.34% year-on-year for April 2024, down from 20.68% in March 2024, marking the lowest reading in the past 23 months since May 2022. Remittances for April were recorded at $2.8 billion, up 28% year-on-year but down 5% month-on-month. The current account recorded a surplus of $491 million in April 2024, compared to a surplus of $434 million in March 2024, bringing the 10-month fiscal year 2024 current account deficit to $202 million.

Moreover, news that Pakistan and Saudi Arabia have agreed in principle on a deal for the Reko Diq project, with the Pakistani government prepared to sell a 15% stake to Saudi investors, also contributed to the positive market sentiment.