Shares at PSX rally 900 points in early morning trade over ‘clarity’ on govt formation
Bulls dominated at the Pakistan Stock Exchange (PSX) on Wednesday as shares gained over 900 points, with analysts attributing the gains to consensus over the formation of the government.
After multiple rounds of talks spanning over one week, an agreement was reached last night between the PML-N and the PPP to share power in order to form the next government.
Last week, growing doubts about the formation of a new coalition government amid raging protests against alleged manipulation of election results across the country kept the market sentiment depressed.
Today, bulls took strong hold of the KSE-100 index as soon as the opening bell rang. According to the PSX website, the index was trading at 61,422.16 points at 9:55am, up 957.92 or 1.58 per cent from the previous close of 60,464.24.
Tahir Abbas, head of research at Arif Habib Limited, noted that the market went up 1.5pc day-on-day basis “amid clarity on the political direction regarding the formation of a new government” which bolstered investor confidence.
However, he highlighted that investors were vigilant and waiting for the economic strategy of the newly elected government, which was “anticipated to steer market dynamics”.
Speaking to Dawn.com, Mohammed Sohail, chief executive of Topline Securities, said the market opened to 900 points after news of political parties reaching an agreement for the government formation.
Awais Ashraf, director of research at Akseer Research, was of a similar opinion as well.
“Clarity on the formation of a new government in the Centre after major political parties reached an agreement yesterday helped to restore investor confidence.
“The new setup will likely continue with the reforms and take a more cohesive approach for settling issues between the Centre and provinces required for fiscal discipline,” he said.
Yousuf M. Farooq, director of research at Chase Securities, observed that the stock exchange opened on a positive note “after some clarity emerged overnight regarding the formation of the government”.
He noted that the development also reduced the risk of failure in proceeding with a new International Monetary Fund (IMF) programme, which gave investors some confidence.
“While risks remain regarding the next steps of the opposition parties, the combination of cheap valuations and increased clarity has provided a breather this morning,” Farooq said.
Moreover, he highlighted that Maple Leaf Cement Factory’s results exceeded market expectations.
Farooq said that the attention was now on the appointment next finance minister, as a new IMF program needed to be negotiated. He added that a finance minister who had historically been hostile towards the IMF or rating agencies would be viewed negatively by the market.
More to follow