PSX ends higher amid low inflation

Pakistan Stock Exchange (PSX) closed the week on a positive note, driven by improved domestic liquidity and investor optimism ahead of the International Monetary Fund’s (IMF) first review under the $7 billion Extended Fund Facility (EFF).

Inflation in February 2025 dropped to a 113-month low of 1.5% year-on-year (YoY) – the lowest level since September 2015. Meanwhile, a treasury bill (T-bill) auction saw stable yields for three-month papers, with minor declines in six-month and 12-month yields.

On a day-on-day basis, the PSX began the week on Monday with extensive selling pressure as the benchmark KSE-100 index plunged to the intra-day low of 111,829 points before closing at 111,987, down 1,265 points.

However, the market staged a strong rebound on the second day, fuelled by a decade-low inflation rate and expectations of robust earnings by major companies in banking, fertiliser and oil sectors. At close, the index stood higher by 757 points.

On Wednesday, the bourse reversed course as selling pressure later in the trading session wiped out earlier gains of almost 600 points and the KSE-100 closed with a loss of 490 points.

The second last trading day of the week registered a robust rally, where the benchmark index climbed a notable 1,459 points, reflecting renewed investor confidence.

On Friday, the PSX closed on a bullish note, surging 686 points as investors anticipated a reduction in the State Bank of Pakistan’s (SBP) key policy rate next week following a decade-low inflation reading of 1.5% in February 2025.

The KSE-100 index closed at 114,399 points, reflecting a WoW gain of 1,147 points, or 1.01%.

Arif Habib Limited (AHL) wrote in its weekly review that the market concluded the week on a positive note, supported by improved domestic liquidity and favourable investor sentiment surrounding discussions on the IMF’s visit for the first review under the $7 billion EFF.

On the economic front, inflation in February 2025 dropped to a 113-month low of 1.5% YoY, the lowest since September 2015 (1.3%). Additionally, a T-bill auction was held during the week, with yields on three-month bills remaining unchanged, while six-month and 12-month papers saw a decrease of one basis point (bps) each, AHL said.

For 8MFY25, Pakistan’s trade deficit widened 6.3% YoY to $15.8 billion. On a positive note, sales of oil marketing companies (OMCs) grew 4% YoY during the same period. However, urea and di-ammonium phosphate sales declined 37% and 64% YoY, respectively.

Furthermore, the SBP’s foreign exchange reserves increased $27 million and settled at $11.2 billion, while the Pakistani rupee depreciated slightly by 0.05%, closing at 279.82 against the US dollar.

Sector-wise, positive contribution came from exploration & production (656 points), cement (451 points), OMCs (346 points), power (177 points) and glass (114 points). Meanwhile, the sectors that contributed negatively were technology & communication (122 points), textile (97 points), autos (89 points) and commercial banks (48 points).

Stock-wise, positive contributors were Pakistan Petroleum (290 points), PSO (247 points), OGDC (236 points), Hubco (185 points) and Fauji Cement (156 points).

Scrip-wise, negative contribution came from Systems Limited (84 points), Millat Tractors (77 points), Mehmood Textile Mills (75 points), Bank AL Habib (74 points) and UBL (64 points).

Foreigners’ selling continued during the week under review, which clocked in at $5.3 million compared to net selling of $6 million last week, AHL added.

Wadee Zaman of JS Global said the KSE-100 index remained positive during the outgoing week, closing at 114,399 points and gaining 1% WoW. Average volumes decreased 41% WoW to 291 million shares.

The week began on a negative note with investors remaining cautious as the IMF team reviewed targets in the first review of Pakistan’s Extended Fund Facility, he said. Tax collection fell short by Rs606 billion against the target of Rs7.95 trillion for 8MFY25.

However, positive developments later propelled the market to a positive close. The Consumer Price Index (CPI) for February 2025 came in at 1.5%, marking the lowest reading in nearly a decade. This kept real interest rate above 10 percentage points, he said.

Furthermore, the government reached a deal with commercial banks to borrow Rs1.25 trillion at a rate of 1% below the prevailing Kibor. This comes as a major breakthrough for the energy sector and can unlock significant cash flow for companies stuck in circular debt, Zaman added.