KARACHI:
If I let you know that the inventory market index has simply crossed 50,000, then it should not be information for you if you’re nonetheless investing available in the market and watching the index on a every day, if not hourly, foundation.
Nonetheless, I’m not referring to final week, however to the yr 2017 when the KSE-100 index hit the 50,000 mark for the primary time, the extent the bourse was struggling to clear for the previous six years.
The interval from 2013 to 2017 was a exceptional chapter within the historical past of Pakistan inventory market, characterised by an enthusiastic surge in efficiency, primarily attributed to the initiation of the China-Pakistan Financial Hall (CPEC).
This transformative challenge not solely formed Pakistan’s financial panorama but in addition ignited investor optimism, notably impacting sectors essential to CPEC.
The announcement and subsequent initiation of the CPEC challenge introduced a wave of optimism to Pakistan’s financial horizon. A sport changer when it comes to infrastructure improvement and financial collaboration, CPEC promised many alternatives for companies, traders, and the nation’s general financial well being.
One sector that skilled a very enthusiastic response from traders was the cement business.
Cement, being a basic constructing block for infrastructure improvement, was poised to learn considerably from the large development tasks deliberate below CPEC. This translated into elevated demand and profitability for cement corporations, thereby driving up their inventory costs.
Listed cement corporations on the Pakistan Inventory Trade witnessed a bullish pattern throughout this era. The rally at the moment made us the candidate for an improve to the rising market, which additional fuelled the euphoria that pushed the index additional into the uncharted territory when it hit an all-time excessive of 53,000.
Nonetheless, the cement sector went forward of itself by saying an enormous enlargement, and the resultant value struggle and the later battle for market share resulted in oversupply. Finally, when this capability got here on-line, there was already a slowdown in CPEC after which the Covid-19 pandemic was the ultimate blow that precipitated havoc for the extremely leveraged cement sector.
As soon as the keenness within the cement sector fizzled out, there was an agonising downward spiral until the index hit all-time low at 27,000 degree on the top of the Covid-19 pandemic, the extent that the index cleared a decade in the past in 2013 for the primary time.
Now, after going nowhere for the previous 5 years, the index has lastly cleared the 50,000 degree once more final week with wholesome buying and selling volumes (405 million shares, up 7.7% on a week-on-week foundation).
Traders are questioning if that is nearly as good as it might probably get. As a result of, once we take a look at the horizon, there isn’t a such sport altering catalyst like CPEC, in actual fact, there may be looming uncertainty on each native and international fronts because the traders have taken cautious stance within the final buying and selling periods by taking some chips off the desk.
There may be some feel-good issue because of the ongoing end result season the place improved backside line and payouts are anticipated because of the absence of tremendous tax. Nonetheless, the principle drivers, going ahead, could possibly be the hope that the rate of interest has peaked, as indicated by the latest T-bill public sale, appreciation of the rupee towards USD, enchancment in LSM quantity, which clocked in at 8.4% MoM, and 98% yearly decline within the present account deficit, which stood at $Eight million vs $164 million in August 2023.
Nonetheless, solely time will inform if these elements are already included within the latest strikes or if the rally has some legs to go additional.
The author is a monetary market fanatic and is connected to Pakistan’s shares, commodities and rising expertise
Printed in The Categorical Tribune, October 23rd, 2023.
Like Enterprise on Fb, comply with @TribuneBiz on Twitter to remain knowledgeable and be a part of within the dialog.