Rising exports help Pakistan stock market hit a seven-month high

KSE-100 expected to further climb, say experts
Sep 04, 2020

The KSE-100 index was hovering at a seven-month high at 42,188 points on Thursday.

It is the benchmark index of the Pakistan Stock Exchange.

The KSE-100 index improved by 353 points. The last time it was above 42,188 points was on January 29.

In the last two weeks, the market has been bullish as it increased by 2,213 points. This shows that investor's have likely regained their trust in the markets.

The index has been rising after reaching its lowest level in March when the World Health Organisation declared COVID-19 a pandemic and soon after stock markets across the world reacted to it.

Now the market is bouncing back as the pandemic is starting to exit Pakistan. The economy is recovering and the country is expanding its trading operations.

An increase in exports in July, a high number of foreign investments and positive government policies are the main reasons for this jump.

“The tremendous performance of the KSE-100 index is mainly attributed to Pakistan being the first country in the region to control the pandemic and end the lockdown. This has allowed business activities locally to start earning again and exporters to earn from markets which were previously importing from countries like India and Bangladesh,” Munir Memon, who is a former research officer at PSX, told SAMAA Digital.

The country recorded a current account surplus in July mainly due to a 26% increase in exports compared to the previous month. These factors make investors buy shares rather than sell them which helps KSE-100 to rise.

“Local and foreign investors are investing their money in Pakistan as they find the economy of the country to be stable. With low chances of a second wave in Pakistan and a steady economy whose GDP wasn’t affected as much as other countries, the investors know the country is only to gain from this point and can not go down,” Memon said.

Pakistan has seen an 88% increase in foreign direct investment from $1.36 billion in 2019 to $2.56 billion in 2020. This is mainly because China is investing in the telecommunication and power sector in Pakistan via the CPEC programme.

“Stock prices of companies in the technology sector have shown an immense boost as Prime Minister Imran Khan has shown interest to improve the digital landscape of Pakistan. If the government continues this performance, the stock market is expected to advance upwards in the future,” said Memon.

The top three sectors which gave a return of more than 10% in August were engineering (16.41%), gas utilities (16.25%), and telecom (11.89%), according to Intermarket Securities.

Stocks in the engineering and telecom sector are considered to be technology stocks. An increase in demand for natural gas has assisted gas utility companies to record satisfying profits which are attracting investors.

Around 917 million shares were traded today, a 15-and-a-half-year high which was last seen in March 2005, according to Topline Securities.

Raza Jafri, the director of research at Intermarket Securities, said the KSE-100 index is still reaching its pre-COVID19 points of 43,218 points on January 13. The stock market has some space to move up, he said.


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