As decreased inflation increased investor confidence, shares of the Pakistan Stock Exchange (PSX) rose about 500 points to surpass 105,000 on Wednesday, continuing the bullish momentum.
From its previous finish of 104,559.07 points at 10:34 am, the benchmark KSE-100 index increased 495.37 points, or 0.47 percent, to stand at 105,054.44 points.
The spike occurs two days after the Pakistan Bureau of Statistics reported that November inflation fell to 4.9 percent, the lowest level since 2017.
In reference to the next monetary policy meeting on December 16, Awais Ashraf, director of research at AKD Securities, stated, “Investors are optimistic about further reduction in policy rate as inflation falls below 5 pc for November 2024.”
Investor confidence was also being bolstered by “indications of economic growth recovery, highlighted by a rebound in cement sales and a surge in petroleum sales,” he said.
Cement sales as a whole increased by a pitiful 5.58 percent in November, from 3.927 million metric tons to 4.146 million metric tons during the same month last year.
The “sharp decline in interest rates from 23 pc to 15 pc” was another point made by Yousuf M. Farooq, director of research at Chase Securities.
“This pattern is not unlike previous rallies triggered by interest rate declines in 2002-2003, 2011-2016, and 2021-2022,” he said, highlighting parallels between the current bullish trend and those in the past.
“The main difference this time though is that interest rates were at an all-time high when the rally started, and the rate decline is anticipated to last for another one to two years,” Farooq continued.
He cautioned regular investors to “consult with financial advisors, thoroughly understand their investments, and avoid speculative behavior,” pointing out that stocks priced below Rs 15/share were the subject of “some speculative activity.”
Farooq restated his recommendation that “long-term compounding and prioritizing quality over quantity” be the main priorities of ordinary investors.
He predicted that the PSX would rise “in line with its long-term growth rate of 16pc-18pc,” citing the shift from “safer assets to riskier ones like equities” brought about by the lowering interest rate environment.
“By making consistent, modest contributions to debt and equity investments that are in line with their individual risk profiles, investors are encouraged to ignore short-term market fluctuations and focus on their long-term investment plans,” Farooq stated.
Earlier in the day, the PSX rose 903.57 points to 105,462.64 at 10:25 a.m., but then fell to 104,940.39 in 30 minutes during intraday trading.
Topline Securities Ltd. reports that the ready market’s trade value reached an all-time high of Rs57 billion ($203m) on Tuesday, the highest level in eighteen years.
Adding to the optimism, the nation’s November trade imbalance shrank by 19 percent year over year to $1.59 billion, helped by an increase in exports and a decrease in imports. Market confidence has been further boosted by this recovery, which has strengthened forecasts of a strong current account surplus.
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