Equity investors at the Pakistan Stock Exchange (PSX) on Wednesday experienced a moment of joy and relief after enduring many days of downturns when the KSE-100 index increased by 1094.91 points or 1.81% to close at 61,559.15 level.
This surge came amid news of a coalition government formation agreement between the Pakistan Muslim League-Nawaz (PMLN) and the Pakistan Peoples’ Party (PPP) after a series of negotiations.
The power-sharing arrangement paves the way for President PML-N Shahbaz Sharif to potentially become prime minister for a second term, supported by coalition partners. Meanwhile, Asif Ali Zardari from the PPP is set to be the coalition’s nominee for the presidency.
The equity market has been under pressure for many days, with market moguls attributing political uncertainty as the primary factor.
Investors are still anticipating a post-election rally at the PSX, however, market analysts recommend that investors should capitalise on the dips to achieve better gains in the future.
There is also positive development in the growth of Pakistan’s mutual funds industry.
“Assets Under Management (AUM) of Pakistan’s Mutual Funds Industry reached an all-time high level of PKR 2,159bn in Jan ’24. The growth in AUMs during FY24 (since July’23: 40%) is primarily attributable to the stabilization and revival of investors’ confidence post-IMF program (Jul ’23) alongside higher interest rates”, said Shahid Ali Habib, CEO of Arif Habib Limited.
Today, according to data from Tradeweb, the country’s international bonds, maturing in 2031, saw the largest increase, rising 2.7 cents to 61.7 cents on the dollar. The notes maturing in 2026 experienced a gain of 2.6 cents, reaching 76.95 cents.
In other developments, there has been an increase in the outflow of foreign direct investment (FDI), suggesting that foreign investors currently do not consider Pakistan’s economy a suitable place to park their capital.
“Country witnessed a net FDI outflow of $173 million during January 2024 (highest since October 2018). Net foreign direct investment (outflow) settled at $173mn in January 2024 (highest since October 2018), compared to a net inflow of $237 million during January 2023. During 7MFY24, net FDI inflow was down by 21% YoY to USD 689 mn compared to an inflow of $877 million in 7MFY23”, said Arif Habib Limited.
Additionally, the real effective exchange rate (REER) is also at the highest level since May 2021.
“REER is clocked at 101.7 as of January 2024 as compared to 98.8 in December 2023 (highest since May 2021)”, said Arif Habib Limited.
Call session of the National assembly. Choose Prime Minister. clear uncertainty. We know present govt don’t have the mandate to rule. They must perform to justify their selection. Address issues of economy. Any infighting amongst the coalition partner will belly down their economy. So make it or leave it.