KSE-100 rallies nearly 3pc, Asian stocks up with rate cuts in sight
Business
Latest performance means Pakistan Stock Exchange may end the year on a high
KARACHI (Web Desk/Reuters) – Stocks rallied on Wednesday and recovered some of the ground lost during the past two weeks with nearly 3 per cent surge in the benchmark KSE-100 Index, not only ending the losing streak but also boosting the hopes that the market will end the year on a high.
The latest much-needed gains come on a day which saw Asian stocks rising broadly, tracking a rally from Wall Street as investors latched on to the year-end optimism driven by expectations that the Federal Reserve could begin cutting rates as early as next March.
Read more: Dollar losing appeal amid rate cut hopes, touches five-month low
By the time trading was closed for the day, the KSE-100 had reached 60,863.62 after a 2.86pc, or 1,692.65 points, gain against the previous closing of 59,170.97.
Meanwhile, the companies in energy sector and banks remained “the usual suspects” by leading the rally yet again, as the KSE-100 at point gain crossed the 61,000 mark.
The decline in the previous sessions starting Dec 13 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.
After shedding after shedding 2,534.12 points, or 4.11pc during the last session, the latest gains are a welcoming sign for a market that has been in reverse gear after reaching 66,426.78 on Dec 12 as an all-time high.
Experts were earlier describing the downward movement as year-end profit taking while hoping that the market would settle and remain above 64,000 after market correction. Others were marking 63,000 as the possible barrier.
However, the decline was massive by all standards with around 10pc drop amid the political uncertainty caused by the upcoming elections – an exercise that will have long-lasting consequences for Pakistan.
Another reason that dampened the market sentiments is 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.
ASIAN STOCKS RISE WITH YEAR-END CHEER, RATE CUTS IN SIGHT
As traders wind down with few critical economic data releases scheduled between now and the end of the month, the market mood continues to be dominated by the prospect that major central banks globally could begin easing rates in 2024, with the Fed taking the lead.
Those bets have spurred a bout of risk taking and driven a rally in global equities, with MSCI's broadest index of Asia-Pacific shares outside Japan rising more than 1pc to an over four-month high.
Read more: India's Nifty hits fresh record high on metals rally
The index was on track for a 2.8pc gain this month and looked set to end the year nearly 3pc higher, having clocked a 20pc decline in 2022 – its worst performance since 2008.
Japan's Nikkei ended more than 1pc higher, while Hong Kong's Hang Seng Index rose 1.5pc in its first trading day after being closed for the Christmas and Boxing Day holidays.
Chinese blue chips eked out a marginal gain of 0.2pc.
Market pricing now shows a more than 80pc chance the Fed is likely to begin cutting rates next March, according to the CME FedWatch tool, with over a 150 basis points of easing priced in for all of 2024.
"One of the most notable developments of 2023 came at the end of the year when the Federal Open Market Committee (FOMC) delivered a surprisingly dovish signal at its December meeting," said Tim Murray, a capital markets strategist in the multi-asset division at T Rowe Price.
"This is a big deal. We spent 2023 fearing that the impacts of tight monetary policy would drag the economy into recession. Happily, that did not happen, and a more dovish Fed means the likelihood of recession in 2024 has fallen considerably."
