New Delhi: As Pakistani trade analysts and investment bankers try to make sense of an unprecedented rally in the Pakistan Stock Exchange, there are others who simply dismiss it as “misguided statistics and rumours”. The PSX crossed 58,ooo points for the first time in the country’s history.
Pakistani economist and journalist Ali Nasir calls this a misguided campaign. “A campaign is being initiated with misguided statistics and rumours regarding the economy and stock market. I repeat there is no improvement in any macroeconomic indicator or Pakistan economy that can be considered substantial for the increase in #PSX,” he wrote on X.
The KSE-100 index, a benchmark stock exchange used to compare prices on the Pakistan Stock Exchange (PSX), jumped to its highest of 58,405.92, crossing the previous day’s 58,000 mark for the first time in history.
Reacting to the spike, Mohammad Sohail, an analyst at PSX, tweeted that while it was one of the fastest, the recovery was not unexpected. “New day, new high. Index 58000. But prices still low. From marketcap of USD20b to now close to USD30b
One of the fastest but not unexpected recovery at Pakistan Stock Exchange. 50% return in US dollars in 6 months. After 6 bad years. And the good thing is… This recovery has just started. Market PE 3-4 times still at an unbelievable low levels.”
The country’s continuous rupee recovery and the government’s successful negotiation with the International Monetary Fund (IMF) are said to be two major factors for the hike, a much-needed relief for Pakistan’s economy.
Tahir Abbas, Head of Research at an investment banking and research firm, told Geo. tv that “the market was continuing its positive momentum amid expectations of monetary easing, strong profitability, and certainty on the upcoming general election,” which is scheduled for 8 February next year.
“Despite the fact that the market is trading at an all-time high, the valuation of the market is still attractive,” he added.
Speaking to Dawn, Raza Jafri, the head of equities at Intermarket Securities Ltd, attributed the rally to the resumption of foreign buying. He said that with the government focused on the economy, a decrease in interest rates can be expected. With “risks seemingly under control, the bull run in Pakistan equities can extend and potentially turn into a multi-year rally,” Jafri added.
Prosperity or misguided statistics?
Reacting to the surge, Johar Ali, an X user, wrote, “We are seeing stock market is going up, rupee getting strengthen and other positive indicators of Pakistan economy. All these indicators can only sustain for long term if we have political stability and security situation gets better. Otherwise it will remain for short term.”
In response to Sohail’s tweet, an X user wrote, “It is just because the property market all over Pakistan is crashed for the last 1 year. More to that dollar is down & people stop investing in gold.” Meanwhile, another Pakistani X user said, “In Pakistan, its more fix and very few are manipulating rates to keep buying and selling under their own feet,”
Economic meltdown
In the past year, Pakistan’s economy witnessed a crippling effect due to a large pile of debt taken from international organisations, countries like China, and crushing inflation. In July this year, the country’s external debt service obligations stood at $2.44 billion.
Moreover, the catastrophic floods of last year caused a loss of some $30 billion to the economy, from which Pakistan, the world’s fifth-most populous country, has still not fully recovered. “According to analysts, the country needs at least $20 billion in the next two years to pay back foreign loans with interest,” reported Al-Jazeera.
In July this year, the IMF approved a 9-month Stand-By Arrangement (SBA) for Pakistan for an amount of about $3 billion to support the authorities’ economic stabilisation programme.
The deal, however, has proven to have a drastic impact on the common people in Pakistan. “While the business community expressed qualified support, ordinary Pakistanis dread further hardships due to the inherent conditions of the package. The IMF obligates the government to implement stabilisation policies, leading to increased taxes, levies, elevated energy rates and reduced development spending,” read a recent report by Dawn.
Khurram Hussain, a journalist specialising in the Pakistani economy, wrote in an opinion article for Dawn that “No sacrifice worth the name is being made by the rich, not in terms of their earnings, their asset values or their consumption habits. Of course, this does not mean we abandon the IMF-mandated adjustment.” Hussain further wrote, “It certainly means that we bring the reforms necessary to safeguard people’s incomes as much as the incomes of the elites and the state, in good times and bad.”