Bulls took control of the trade floor at the Pakistan Stock Exchange (PSX) as shares climbed more than 1,400 points on Thursday.
The benchmark KSE-100 index climbed 989.51 points, or 0.88 per cent, to stand at 113,243.27 at 11:56am. By 12:35pm, the index increased 1,253.77 points, or 1.12pc, to stand at 113,507.53 from the previous close.
Finally, the index closed at 113,713.17, up by 1,459.41 points or 1.3pc, from the last close of 112,253.76.
Yousuf M. Farooq, director research at Chase Securities, said that the market had reacted “positively” to media reports, which suggested that the International Monetary Fund (IMF) “may allow a downward revision in tax targets”.
Finance Minister Muhammad Aurangzeb had confirmed that discussions between the IMF and Pakistan for the first biannual review of the $7 billion programme had begun, adding that the country was “well-positioned” for the talks.
A media report suggested that the Fund may lower the tax target to less than Rs12.5 trillion from the original Rs12.9tr “due to overall slowdown of economic activities and huge shortfall” witnessed so far.
“Additionally, declining oil and coal prices have led some market participants to revise their inflation estimates downward,” Farooq said.
“Previously, most participants had factored in inflation expectations of up to 10pc by June, along with a potential pause in interest rates,” he noted, adding that “however, the recent drop in commodity prices and multiple weeks of declining SPI readings are likely to result in further downward revisions in inflation and interest rate expectations”.
Looking ahead, he highlighted that the IMF programme and the current account balance will remain critical for “short-term market performance”.
Sana Tawfik, head of research at Arif Habib Limited, attributed the bullish momentum to anticipation of a rate cut decision by the State Bank of Pakistan (SBP)’s Monetary Policy Committee (MPC) due on March 10.
“We are expecting a rate cut of 50 basis points — so that is one of the triggers,” she said, adding that international oil prices have also come down.
“Thirdly, liquidity has also come in from local institutions so there’s fresh buying in the market,” she added.
Meanwhile, Awais Ashraf, director research at AKD Securities, said that a “positive” response from US President Donald Trump had “eased much of the uncertainty” surrounding ties with the US.
In a rare public gesture of appreciation, Trump had thanked Islamabad for its role in capturing the person responsible for killing 13 US service members. He said: “I want to thank especially the government of Pakistan for helping arrest this monster.”
“Moreover, investors are optimistic about a successful IMF review and unlocking additional funds for climate financing,” he added.
A significant reduction in the inflation trajectory, the recent decline in oil prices, and recent trade numbers have raised the odds of continued monetary easing in the upcoming monetary policy
Yesterday, the stock market had struggled as investor sentiment remained mixed due to a lack of positive triggers, forcing the benchmark KSE 100 index into the red zone on late profit selling.
Analysts had noted that the market fell sharply lower in sympathy with a sell-off in Asian markets and a slump in global crude oil prices after the Trump administration imposed tariffs on Canada, Mexico, and China, triggering a tariff war.
However, the finance minister’s comment that Pakistan was “well positioned” for the ongoing IMF review had provided some respite as it boosted investor confidence, leading to buying in initial trading hours.
Pakistan and the IMF had reached a three-year, $7bn aid package deal in July, with the new programme set to allow the country to “cement macroeconomic stability and create conditions for stronger, more inclusive and resilient growth”.
A nine-member mission from the IMF has began its first biannual review of Pakistan’s $7bn Extended Fund Facility (EFF).
