Pakistan stock exchange rebounded, halting a free-fall trend as a result of coronavirus scare that also kicked off a global sell-off, wiping out nearly $6 trillion from global markets last week. Benchmark KSE-100 index gained 3.34%, closing to clock at 39,296.30.
The local bourse remained positive throughout the session touching an intraday high of 39,362.29 and intraday low of 37,983.62 and finally concluded the positive session up by 1312.68 points.The fresh rally was pushed in by geo-political and economic developments that has uplifted investor sentiments across the board. On the economic front, Pakistan Bureau of statistics released new inflation data, showing a sharp reduction in the monthly inflation rate. Pakistan’s consumer price inflation slowed to 12.40% in February from the same month a year earlier. The bureau had recorded the CPI inflation at 14.56% in January, the highest in a decade. Prices of food items such as pulses, fresh vegetables and wheat, which have been the main top drivers of inflation, saw a downward trend, the bureau said. The reduction in inflation rate thus picked up investor sentiments, as this can be a positive indicator for a possible reduction in interest rate in State bank’s February policy review. Irfan Saeed Senior Vice President at BMA Capital management said the reduction in inflation is a positive indicator to shore up investor sentiment, but he said it will only allow the market to correct itself towards a stable scale. He said, the impact of recent reduction in oil prices will kick in at least after two months, since trickle-down effect is not immediate. Thus, Mr Saeed said although the market sentiments will remain positive in the following sessions, it is unlikely the state bank will change its policy rate this month, and will wait till further reduction in the inflation rate.
On the geo- political front the peace agreement signed between the United States and Taliban have marked the end of an 18-year old war on Pakistan’s border, costing billions of dollars to the national economy and over 70,000 dead. The end of afghan war rebuilding process will not just ease off pressure on Pakistan’s economy, by the return of afghan refugees and reduction in security related budget will pick up national economy. Furthermore, the rebuilding process will drive cement and steel sectors north, as the demand of brick and mortar to rebuild Afghanistan will be facilitated by domestic supply chain.
In KSE-100 Sectors that propped up the index were Oil & Gas Exploration Companies with 228 points, Fertilizer with 211 points, Commercial Banks with 173 points, Cement with 159 points and Power Generation & Distribution with 94 points. The most points added to the index was by Engro Corporation which contributed 138 points followed by Oil and Gas Development Company Limited with 97 points, Pakistan Petroleum Limited with 86 points, Hub Power Company Limited with 73 points and Lucky Cement Limited with 73 points. All Share Volume increased by 13.07 Million to 215.25 Million Shares. Market Cap increased by Rs.207.79 Billion. Total companies traded were 371 compared to 358 from the previous session. Of the scrips traded 306 closed up, 48 closed down while 17 remained unchanged.
Asia: Major markets in the region attempted to bounce back on after sharp losses last week, even though Chinese manufacturing data released over the weekend and on Monday came in much worse than expected. China’s Shanghai composite surged on the day as they attempted to recover from Friday’s steep fall. The Shanghai composite was 3.15% higher at about 2,970.93. Hong Kong’s Hang Seng index also advanced 0.62%, as of its final hour of trading.
Japan’s Nikkei 225 recovered from an earlier slip to rise 0.95% on the day to 21,344.08. Shares of Sharp were up 2.2% following reports that the firm is set to start making face masks amid a shortage caused by the coronavirus outbreak. South Korea’s Kospi gained 0.78% to close at 2,002.51.
The fresh rally in the regional stocks was led by hopes of central banks to inject stimulus to defy the odds, led by coronavirus scare and pandemic fears. The markets are now pricing in, the aggressive announcement by the U.S. Federal Reserve, following the central bank chairman’s comments on Friday about taking appropriate action to support the economy. Meanwhile, the record plunge in Chinese PMI numbers have also raised expectations that the People’s Bank of China could further take action to add stimulus.