Karachi, The Pakistan Stock Exchange (PSX) continued its bullish momentum this week, closing at its highest ever at 72,742 points, with a weekly gain of 1,833 points or 2.58%. The market's positive sentiment was driven by expectations of investment from Saudi Arabia, a successful visit by the Iranian President, and Pakistan's inclusion in the International Monetary Fund's (IMF) executive board agenda. Additionally, macroeconomic indicators showed encouraging trends.
According to AKD Securities Limited, the current account balance for March 2024 recorded a surplus of US$619 million, taking the total current account deficit for the first nine months of FY24 to US$508 million, an 87% year-over-year reduction. Foreign direct investment in March saw an 89% month-over-month increase, reaching US$258 million. Inflation is expected to ease, with the Consumer Price Index (CPI) for April 2024 estimated at 16.9% year-over-year compared to 36.4% in the same period last year. The easing inflationary pressures contributed to a decline in secondary market yields, with the 1-year yield decreasing by 53 basis points month-to-date to 20.21%.
Additionally, the Sensitive Price Index (SPI), a weekly measure of inflation, has been on a downward trajectory for the past two weeks, indicating a favorable outlook for inflation next month. This suggests that monetary easing could begin at the upcoming Monetary Policy Committee (MPC) meeting, scheduled for Monday. However, concerns regarding smuggling, particularly in the petroleum sector, have emerged, potentially impacting the refinery sector.
The positive market momentum also reflected in increased trading activity. Average daily trading volume rose to 650 million shares compared to 492 million shares in the previous week, a 32% increase week-over-week. The State Bank of Pakistan (SBP) reported that foreign exchange reserves fell by US$74 million, standing at US$7.98 billion as of April 19, 2024. The Pakistani Rupee depreciated slightly by 0.03% week-over-week, closing at 278.4/US$.
Other significant news during the week included a 37% surge in Pakistan's IT exports, reaching a record US$306 million in March, and RDA inflows rising to US$7.66 billion. Additionally, Finance Minister Ishaq Dar stated that the Gross Domestic Product (GDP) is expected to grow by 2.6% in FY24. Sector-wise, Fertilizers, Synthetic and Rayon, and ETFs were among the top performers, while Tobacco, Miscellaneous, and Refinery sectors declined.
The upcoming MPC meeting will be closely watched, with the potential start of monetary easing expected to support the ongoing bullish trend in the market, particularly for debt-heavy sectors. The disbursement of the third tranche of the IMF's Stand-By Arrangement and the initiation of talks with the IMF for a new Extended Fund Facility will also be key factors. Given the market's record high, investors are advised to focus on fundamentally strong companies for long-term stability.