Karachi: The Karachi Stock Exchange (KSE100) recorded a remarkable performance this week, opening strong and reaching a record high of 85,669 points on Wednesday. Despite slight declines due to profit-taking and issues in the power sector, the index concluded the week with a gain, settling at 85,483 points, which represents an overall weekly increase of 2.3% or 1,951 points.
According to AKD Securities Limited, the positive trend was largely driven by improved liquidity in equities, facilitated by local funds shifting their investments from fixed-income assets, influenced by easing interest rates. The market’s upbeat mood was further enhanced by the visit of a Saudi delegation, culminating in the signing of 27 memorandums of understanding worth US$2.2 billion, alongside productive discussions regarding the Reko Diq mining project. The government also progressed in restructuring the energy sector by terminating Power Purchase Agreements with five Independent Power Producers, with plans to negotiate terms with 17 additional producers.
The economic indicators showed robust growth, with workers’ remittances for September reaching US$2.85 billion, marking a 29% increase year-over-year. Although the trade deficit stood at US$1.78 billion for the month, the current account balance is projected to remain stable with a potential surplus. In response to a first-quarter fiscal year 2025 deficit, the government has initiated discussions with the International Monetary Fund regarding possible tax adjustments, targeting direct imports and advanced import taxes, with a new tax on agriculture expected by July 2025.
Market activity also saw significant improvement, with a 51.3% increase in participation from the previous week. The average daily traded volume jumped to 518 million shares, up from 342 million. On the financial reserves front, the State Bank of Pakistan’s foreign exchange reserves climbed to a 2.5-year high of US$10.8 billion as of October 4, 2024.
Despite these gains, the power generation and distribution sector, along with the vanaspati and allied industries and paper and board sectors, faced declines. In contrast, transport, modarabas, and woollen sectors saw substantial gains, highlighting the week’s mixed sector performance.
Looking ahead, the market sentiment is expected to remain positive, buoyed by ongoing monetary easing and favorable valuations. High-dividend-yielding stocks, in particular, are recommended for investment as they are likely to re-rate favorably compared to fixed-income returns.