KARACHI: The Pakistan Stock Exchange (PSX) staged a strong recovery in the first week of November after October’s bearish spell, with the benchmark KSE-100 index gaining 4.5 per cent as falling international oil prices, easing inflation and hopes of reduced geopolitical tensions lifted investor sentiment.
The index rose 7,477 points to close at 173,887 points on Friday from 166,409 points in the previous week, according to Arif Habib Ltd (AHL).
AKD Securities Ltd attributed the rally to a 15.9pc weekly decline in Brent crude prices to $98.8 per barrel, following diplomatic efforts to ease tensions in the Middle East and the outcome of the US midterm elec-tions. Democrats’ surge in Congress fuelled expectations of a possible reassessment of President Donald Trump’s foreign policy and a reduction in regional tensions.
However, analysts cautioned that market direction would remain sensitive to developments in US-Iran negotiations and movements in international oil prices.
On the macroeconomic front, inflation, measured by the Consumer Price Index (CPI), slowed to 9.61pc year-on-year in October, down from 10.26pc in September, although it remained significantly higher than 6.25pc recorded in October last year.
Average inflation during the first four months of FY27 stood at 10.1pc, compared with 4.7pc in the corresponding period last year.
The government raised around Rs386400 billion through its latest Pakistan Investment Bonds (PIBs) auction against a target of Rs350bn. Cut-off yields declined by 10-12 basis points across selected tenors, with the strongest participation recorded in three-year bonds, which attracted approximately Rs165.3bn.
The improvement in yields reflected expectations of easing inflationary pressuresand a potentially more accommodative monetary policy outlook.
Meanwhile, Pakistan’s trade deficit widened by 20pc year-on-year and 10pc monthon-month to $3.9bn in October, according to the Pakistan Bureau of Statistics.
Exports increased 2.8pc year-on-year to $2.9bn, while imports rose 11.8pc to $6.8bn, highlighting continued pressure from the import bill.
On the external front, the State Bank of Pakistan’s foreign exchange reserves increased by $40 million week-on-week to $21.6bn as of Oct 30, providing import cover of approximately three months. The rupee also edged up 0.03pc against the dollar to close at Rs276.66.
Domestic petroleum prices provided further relief, with petrol prices falling 6.7pc to Rs352.59 per litre and high-speed diesel (HSD) declining 4.6pc to Rs382.25 per litre, following a reduction in ex-refinery prices.
Sectoral data presented a mixed picture.
Urea sales surged 39pc year-on-year to 487,000 tonnes in October, led by Fauji Fertiliser Company, whose sales increased 54pc to 257,000 tonnes. Fatima Fertiliserrecorded growth of 30pc, while Engro Fertilisers posted a 13pc increase, according to AHL.
Oil production rebounded 8.9pc week-onweek to 64,700 barrels per day, mainly because of the restoration of output from northern fields. Gas production, however, edged down 0.4pc to 3,063 million cubic feet per day.
Refinery throughput increased 9.7pc year-on-year to 1.119 million tonnes in October, supported by higher HSD and furnace oil sales.
Cement despatches increased 0.4pc yearon-year to 4.8m tonnes, with domestic demand supported by recovering construction activity. Exports remained under pressure amid the continued closure of the Afghan border.
Banking stocks emerged as the biggest contributors to the market’s advance, adding 2,659 points, followed by cement with 1,266 points and fertiliser with 988 points. Power and investment banking shares contributed another 545 and 535 points, respectively.
Among individual stocks, Fauji Fertiliser Company added 613 points, Lucky Cement564 points, Engro Holdings 519 points, United Bank 491 points and Meezan Bank 480 points. Refinery stocks were the principal drag, with ATRL shedding 163 points and Cnergyico contributing a negative 76 points.
Average daily trading volume increased 43pc week-on-week to 856 million shares, while average traded value rose 24pc to $103m, according to AHL.
Looking ahead, analysts expect market sentiment to remain linked to progress in Middle East diplomacy, international oil prices and domestic economic indicators.
Investors will also monitor the MSCI review scheduled for November 11.
AKD Securities believes improving economic fundamentals and any further deescalation in the Middle East could support equities by lowering oil prices and creating room for monetary easing.
Despite the recent rally, valuations remain relatively attractive. The benchmark index is trading at a trailing price-to-earnings ratio of around 7.3 times, with a dividend yield of 6.8pc, while its forward price-to-earnings multiple stands at 6.3 times, according to brokerage estimates.