PSX rallies over 400 points in early trading as investor sentiment improves

Buying activity returned to the Pakistan Stock Exchange (PSX) on Monday, with the benchmark KSE-100 Index gaining more than 400 points

KARACHI: Buying activity returned to the Pakistan Stock Exchange (PSX) on Monday, with the benchmark KSE-100 Index gaining more than 400 points during the opening phase of trading as investors showed renewed interest in major sectors.

At around 9:50am, the benchmark index was trading at 181,880.56 points, recording an increase of 450.54 points, or 0.25%, compared with the previous close.

The positive momentum was supported by buying across several key sectors, including automobile assemblers, cement companies, commercial banks, oil and gas exploration firms, oil marketing companies (OMCs) and refineries.

Several heavyweight stocks also contributed to the upward movement. HUBCO, ARL, OGDC, POL, PPL, PSO, HBL, MCB, MEBL and NBP were among the prominent index constituents trading in positive territory during the early session.

The latest gains came after the stock market delivered a strong performance last week, when easing geopolitical concerns helped improve investor confidence. Developments surrounding diplomatic efforts between Iran and Oman regarding shipping activity through the strategically important Strait of Hormuz, coupled with expectations of a possible wider understanding between the United States and Iran, provided some relief to financial markets.

The KSE-100 Index had climbed 5,335.89 points, or around 3%, during the previous week, closing at 181,430.02 points.

Global markets provide additional support

The positive trend at the PSX was also in line with broader gains across Asian equity markets. Regional stocks moved higher on Monday after Wall Street ended the previous session at record levels, supported by weaker-than-expected US employment data.

The softer US jobs figures reduced expectations of an immediate increase in borrowing costs, encouraging investors to take on more risk. However, uncertainty surrounding diplomatic developments in the Gulf continued to influence energy markets.

Oil prices edged higher as concerns persisted over the movement of ships through the Strait of Hormuz, one of the world’s most important routes for global energy supplies.

Iran said on Sunday that discussions with Oman over arrangements for new shipping lanes through the Strait of Hormuz were nearing completion. However, Tehran maintained that the waterway would not fully return to normal operations until the United States met additional conditions.

The uncertainty contributed to a rise in international crude prices. Brent crude futures increased 0.9% to $84.32 per barrel, while US West Texas Intermediate crude gained 0.7% to $78.74 per barrel.

US inflation data in focus

Investors are also closely watching the upcoming US consumer inflation data, which could influence expectations regarding the Federal Reserve’s monetary policy.

The US July consumer price report, due on Wednesday, is expected to show a 0.1% increase in headline inflation and a 0.2% rise in core inflation, according to market expectations.

A stronger-than-anticipated inflation reading could revive concerns that the Federal Reserve may consider raising interest rates in the coming months. Conversely, a softer reading could strengthen expectations of a more accommodative monetary policy.

Market pricing currently indicates that expectations for a September rate move have weakened. The probability of such a move has fallen to roughly 44%, compared with about 67% a week earlier.

The decline in expectations for higher interest rates supported US Treasury bonds on Friday and helped major Wall Street indices finish at record levels.

Asian equities follow Wall Street

Asian markets broadly followed the positive lead from the United States on Monday.

Japan’s Nikkei 225 advanced around 0.6%, while South Korea’s benchmark index gained approximately 0.5%. Meanwhile, MSCI’s broadest index of Asia-Pacific shares excluding Japan rose about 0.3%.

For Pakistan’s equity market, the combination of stronger global sentiment, improved geopolitical expectations and renewed buying in heavyweight stocks provided support at the start of Monday’s session.