After two days of record-breaking losses, the Pakistan Stock Exchange (PSX) witnessed a strong recovery on Friday as the benchmark KSE-100 index surged by 3,238 points, closing at 109,513 points. This marked a 2.96% increase compared to the previous day’s close, signaling renewed buying interest in the market.
The rebound comes after a massive selloff earlier in the week, during which the KSE-100 index lost over 8,500 points in just two days. On Wednesday, the index experienced its worst-ever single-day decline in terms of points, dropping by 3,790 points (3.41%). The downward trend continued on Thursday, with the index shedding another 4,795 points (4.51%) in a bloodbath session.
Trading Activity
Trading volume on Friday stood at 740.04 million shares, a decline from the 1.15 billion shares traded on Thursday. The total value of shares traded also dropped to Rs. 38.89 billion, compared to Rs. 52.14 billion in the previous session. Out of 459 companies that traded, 281 recorded gains, 119 sustained losses, and 59 remained unchanged.
Market Recovery and Investor Sentiment
The recovery was attributed to renewed buying interest, with analysts suggesting that equities remain an attractive option for investors. A report by brokerage house Topline Securities highlighted that since September 2024, the Pakistani stock market has delivered a 35% return in both rupee and US dollar terms. This performance has been driven by strong net inflows of Rs. 58 billion ($207 million) into local mutual funds, as investors shifted from fixed-income instruments to equities.
Shift from Fixed Income to Equities
The shift from fixed income to equities is largely due to a significant decline in yields on Treasury Bills. Yields on 12-month and 6-month Treasury Bills have fallen by 1,253-1,261 basis points, from a peak of 24.73% and 24.51% in September 2023 to 12.20% and 11.90% as of December 19, 2024. This decline has made equities a more attractive investment option.
Topline Securities also noted that equities are likely to remain the preferred choice for investors in the current cycle. Unlike previous years, when investors turned to dollars, real estate, gold, or prize bonds for higher returns, equities are expected to attract more liquidity due to several factors:
- Restrictions on Dollar Purchases: Tighter regulations have limited the ability to invest in foreign currency.
- Increased Taxation and Compliance: Higher taxes and stricter compliance measures, along with revised property valuation rates by the Federal Board of Revenue (FBR), have made real estate less appealing.
- Discontinuation of High-Denomination Prize Bonds: The removal of unregistered high-value prize bonds has further reduced alternative investment options.
