PSX off new all-time high as late profit-taking weighs

After flirting with yet another new all-time high of above 86,400 points, stocks on Wednesday were flattened by late selling as investors shed overbought holdings to interrupt a multi-session rally, triggered by optimism over a big reduction in interest rates this year, traders said.

Pakistan Stock Exchange’s (PSX) benchmark KSE-100 Shares Index finished at 85,669.27 points, gaining a meagre 5.30 points or 0.01%, after hitting an intraday high of 86,451.42 points.

Federal Minister for Finance and Revenue, Senator Muhammad Aurangzeb's forecast of a further drop in inflation and interest rates bolstered economic hopes, while sentiments were also buoyed by reports that Saudi Arabia was set to sign $2 billion agreements with Pakistan.

“The government has strived hard to bring about economic stability,” said the finance minister asserting the efforts of the ruling coalition have started paying off.

Investors flocked to index-heavy stocks, including automobile manufacturers, commercial banks, fertiliser companies, oil and gas exploration firms, and oil marketing companies.

Blue-chip stocks like Pakistan State Oil (PSO), Pakistan Petroleum Limited (PPL), Oil and Gas Development Company (OGDC), Fauji Fertilizer Company (FFC), National Bank of Pakistan (NBP), and Habib Bank Limited (HBL) remained in the limelight.

Announcing that the much-resisted structural economic reforms were finally underway, the finance czar forecast the inflationary pressures to ease further and the central bank's hawkish monetary outlook to continue. “Inflation has dropped to single digits,” said Aurangzeb expecting it to hit new lows.

Consumer Price Index (CPI)-based inflation fell to 6.9% year-on-year in September 2024, the lowest since January 2021, down from 9.6% in August, driven by the high base effect, easing commodity and energy markets, and a stable currency, according to the Pakistan Bureau of Statistics (PBS).

Last month, the SBP's Monetary Policy Committee slashed the key policy rate by 200bps to 17.5% from 19.5%, citing a steep fall in both headline and core inflation over the past two months.

Mohammad Sohail, CEO of Topline Securities in an X post said from a low of 41,000 in June 2023, the PSX had more than doubled, crossing 86,000 points —a gain of 110% in Pakistan rupee terms and 115% in US dollar terms in just 15 months.

"Despite this rally, stocks are still trading at an average price-to-earnings ratio of just 4x, indicating potential value for investors," Sohail added.