Shares at PSX Make Marginal Gains on Uncertainty About Next Budget

Fri May 31 2024
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KARACHI: Shares at the Pakistan Stock Exchange (PSX) on Thursday made just marginal gains of about 42 points amid uncertainty about the next budget.  The KSE-100 index stood at 75,021.59 points, gaining 0.25 per cent, at 11:34am from the last close of 74,836.30.  However, the index has failed to hold the gains and closed at 74,878.12, up by only 0.06pc, from the last close.

Shahab Farooq, director of research at Next Capital Limited, attributed the early upward trajectory to expectations of a decline in inflation for May and drop in T-Bills cut-off yields in auction on Wednesday “fueling optimism on rate cut expectations” in the next Monetary Policy Committee meeting in June, “leading to positive sentiments in the market in the early hours of the day”.

He said that they did not expect the policy rate to be decreased in the next Monetary Policy Committee meeting as they believed that MPC would give preference to wait and assess budgetary measures before taking decision on the quantum and timing of decrease in the policy rate.

Shahab Farooq also emphasized that “the market is unable to hold the optimism due to uncertainties about the next budget”.

The benchmark KSE-100 turned negative as the session advanced, trading in the red at 1:02pm as the index lost around 247 points from the last close. However, the index once again turned positive, making marginal gains at 3:30pm.

Awais Ashraf, director of research at Akseer Research, stated that the decline in cutoff yields of treasury bills in yesterday’s auction, amid lower expected inflation readings for May, boosts confidence for a rate cut in the next monetary policy. He said, “Subsequently, investors remain bullish on cyclical sectors.”

“The enthusiasm seems to be short-lived given concerns over fiscal tightening and the new IMF programme,” Awais Ashraf remarked.

Yousuf M. Farooq, director of research at Chase Securities, credited the upward trajectory to the cut in the three-month treasury bills by 60 basis points yesterday. He noted that there were 30bps decreases in six-month and 12-month papers. “This reduction in rates has fueled expectations of a rate cut going forward. Interest rates act like gravity for stock prices, as interest rates go down, stock prices go up.”

He said that the market could remain jittery till the budget as investors seek clarity on the IMF programme and new taxes. He further said that monetary and fiscal policy are both likely to remain tight going forward.

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