PSX flat after hitting record high as investors lock in profits

The stock market traded flat on Friday as investors booked gains following a record-breaking rally fuelled by bullish sentiment ahead of corporate earnings announcements and expectations of monetary easing.

Sana Tawfiq, Head of Research at Arif Habib Limited, noted: "Momentum to continue amid result season. However, there will be episodes of profit taking.”

The Pakistan Stock Exchange’s (PSX) benchmark KSE-100 Index touched an intraday high of 140,585.38 points, marking a gain of 1,919.89 points, or 1.38%, while the lowest level of the day was recorded at 138,551.61 points, reflecting a drop of 113.88 points, or 0.08%.

“Stocks trading at a new all-time high ahead of major earnings announcements due next week and likely SBP policy easing amid thin inflation," said Ahsan Mehanti, Managing Director and CEO of Arif Habib Commodities. 

"Expectations over strong financial results and annual payouts played catalyst role in bullish activity at PSX,” he added.

Investor optimism was further supported by the finance minister’s recent remarks regarding monetary easing. On Monday, Finance Minister Muhammad Aurangzeb stated there was room to reduce the interest rate, though the decision lies solely with the State Bank of Pakistan (SBP). 

In its last policy meeting, the SBP held the benchmark interest rate at 11%, citing inflationary risks and geopolitical uncertainties following the Iran-Israel conflict. The date for the upcoming Monetary Policy Committee meeting has yet to be announced but is expected by the end of July.

Investor sentiment remained buoyant following the latest SBP data, which showed that central bank foreign exchange reserves rose by $23 million to $14.526 billion in the week ending July 11, surpassing the IMF's $13.9 billion target. 

Although overall liquid reserves declined $72 million to $19.957 billion, the rise in SBP-held reserves was supported by multilateral inflows, remittances, and ongoing dollar purchases from the interbank market.

Further reinforcing the bullish mood, the government successfully raised Rs342 billion through the auction of fixed-rate Pakistan Investment Bonds (PIBs), exceeding its Rs300 billion target. 

The cut-off yields on various tenors declined across the board, reinforcing expectations of further monetary easing. The yield on two-year PIBs fell by 54 basis points to 10.848%, while the yield on three-year bonds declined by 35 basis points to 11.05%. The auction results showed a drop in yields, reinforcing expectations of further monetary easing.

Yields on five-year bonds dropped by 31 basis points to 11.39%, and the yield on the 10-year tenor fell by 30 basis points to 12.2%. No bids were accepted for the 15-year bonds.

The bullish trend extended from Thursday, when the KSE-100 had surged by 2,285.53 points, or 1.68%, to close at 138,665.49. That session saw an intraday high of 138,943.47 points and a low of 136,674.98 points.