KARACHI (Web Desk/Reuters) – Stocks surged for the second consecutive day as the benchmark KSE-100 Index climbed around 2.0 per cent on Thursday, meaning that the market may end the year on a high note after two weeks of massive losses.
During intraday trading, the KSE-100 Index at one point had jumped to 62,750.77, but settled at 62,052.23 by the time session ended after a net gain of 1,188.61 points, or 1.95pc, against the previous closing of 60,863.62.
With trading volume of over 377 million shares for KSE-100, the benchmark index was again boosted by the companies associated with the energy affairs and the banking sector.
The latest trend means the market has shrugged off the fears related to political instability, at least temporarily, amid the looming general elections which will produce a new elected government whose policies are going to decide the future of Pakistan.
One of the factors behind the surging stocks is a weakening US currency as the dollar index, which measures it against six rivals, fell to a fresh five-month low of 100.81 on Thursday in Asian trading. The index fell 0.5pc on Wednesday and is on course for a 2.6pc decline this year, snapping two straight years of strong gains.
Read more: Bruised dollar wobbles as traders are eyeing US rate cuts next year
In money market, the local currency was up by another 10 paisa during early intraday trading in official exchange rate on Thursday, thus following the global trend and strengthening the impression that the country won’t see more of the dreaded rupee devaluation and the US Federal Reserve will soon go for interest rate cuts – starting a cycle for countries like Pakistan too.
A strong rupee means reduction in imports bill and possible reduction in inflation, which has been on the rise despite a weakening dollar thanks to the increase in power and gas tariffs.
At the same time, the oil prices too are not increasing to the alarming level, as feared, which may fuel inflation to new highs.
Read more: Oil drops almost 2pc as investors watch Red Sea developments
ASIAN MARKETS
Elsewhere, Asian shares scaled five-month peaks on Thursday as market wagers on ever-more aggressive rate cuts extended a huge rally in US stocks and bonds, while also leaving plenty of scope for disappointment in the new year.
The S&P 500 has climbed 14pc in just two months to within a whisker of its all-time closing peak, while its price to earnings ratio is up by a quarter on the year at 24.0.
MSCI's broadest index of Asia-Pacific shares outside Japan added another 1.4pc, to be up 11pc in two months and at its highest since August.
Japan's Nikkei was off 0.4pc as a rebound in the yen has kept its gains for December to a minimum.
Even Chinese blue chips CSI300 Index bounced 2.3pc, having generally missed out on the global cheer as foreign investors fretted about economy's faltering recovery and tensions with the United States.
A lack of major news has not stopped investors from ramping up bets on rapid-fire rate cuts from the Federal Reserve. Futures now imply an 88pc chance of a rate cut as early as March, a huge swing from a month ago when the probability was just 21pc.
The market has about 157 basis points of easing priced in for 2024, and sees rates reaching 3.00-3.25% over 2025.
"The rapid decline in inflation is likely to lead the Fed to cut early and fast to reset the policy rate from a level that most participants will likely soon see as far offside," wrote analysts at Goldman Sachs in a note.
STATE OF AFFAIRS IN PAKISTAN
On Wednesday, the Pakistan Stock Exchange recovered some of the ground lost during the past two weeks with a 2.86pc surge, thus halting and reversing the slide which had started affecting the market on December 13.
The decline in the previous sessions was a product of multiple factors, including market correction after a record-shattering surge, market correction, year-end consolidation and political uncertainty before the Feb elections.
One of the main reasons dampening the market sentiments was that the privatisation process as demanded by the IMF won’t go ahead till the elections and any progress on the subject depends upon the next elected government’s priorities.
Meanwhile, the market had steadied after crossing 66,000 on December 8 as official data revealed alarming sustained rise in inflation. It was followed the nosedive starting just a day after the State Bank of Pakistan (SBP) decided to interest rates at 22 per cent.
The two developments meant that there won’t be any policy rate cut soon as prices are expected to rise further due to the imminent increase in gas tariffs.