The Pakistan Stock Exchange (PSX) celebrated a historic day on Monday as the benchmark KSE-100 Index closed at a record 56,523.58 points, marking the first time it surpassed the 56,000 mark. This bullish trend, which has seen the index rise by 2.04%, has captivated investors’ attention, especially with energy companies and commercial banks leading the surge.
In just over two weeks, the KSE-100 Index has climbed an impressive 5,579.74 points, shattering previous records. Now, the big question on everyone’s mind is whether the market will witness a correction through profit-taking or if it will continue to soar, possibly reaching new highs beyond 58,000.
The answer to this puzzle depends on how investors perceive the future and what expectations they have regarding share values. Interestingly, stocks are still considered undervalued when compared to the market peak in 2017.
Local investors are feeling optimistic for a couple of reasons. First, there are expectations that there won’t be further rate hikes, thanks to declining inflation and positive outcomes from talks with the International Monetary Fund (IMF). The success of the first IMF review of the $3 billion stand-by arrangement is particularly crucial.
This success brings the privatization of state-owned enterprises (SOEs) closer, fulfilling one of the main conditions set under the agreement. To meet these conditions, Islamabad has already implemented IMF demands, such as increasing fuel prices and adjusting power and gas tariffs to reduce the fiscal deficit.
Several factors contribute to the ongoing positive market trend. Macroeconomic indicators have shown improvement, and measures to control smuggling through regulating Afghan Transit Trade have been effective. Additionally, the agriculture sector is performing strongly, with bumper rice and cotton crops contributing to the upbeat atmosphere.
The optimism in the market is not without its share of differing opinions. Some foresee a correction, while others believe the market has the potential to climb even higher. For now, investors are keeping a close eye on developments, both on the economic front and within the stock exchange.