The Pakistan Stock Exchange (PSX) saw a significant boost in intraday trading on Thursday, with the benchmark KSE-100 index rising by more than 400 points. Analysts attribute the surge to a recent upgrade in Pakistan’s credit rating by Moody’s, which has bolstered investor confidence.
As of 10:41 AM, the KSE-100 index had gained 421.02 points, or 0.54 per cent, bringing it to 78,413.80 points, up from the previous close of 77,992.78 points. This upward momentum reflects renewed optimism among investors following the global ratings agency’s decision to upgrade Pakistan’s local and foreign currency issuer and senior unsecured debt ratings to Caa2 from Caa3.
Awais Ashraf, Director of Research at AKD Securities, highlighted the positive impact of Moody’s rating upgrade on market sentiment. “Moody’s upgrade, which comes on the back of improved external liquidity positions, has eased investor concerns, particularly regarding the IMF board’s delayed approval,” Ashraf explained.
Moody’s rating upgrade, announced on Wednesday, was attributed to Pakistan’s improving macroeconomic conditions and moderately better government liquidity and external positions, although these remain at weak levels. The upgrade has provided some relief to a market that had been under pressure due to uncertainties surrounding the timing of Pakistan’s IMF programme.
Yousuf M. Farooq, Director of Research at Chase Securities, noted that the KSE-100 index had been facing challenges in recent weeks due to concerns over the IMF programme. However, he expressed confidence in Pakistan’s ability to manage its debt situation. “We believe that Pakistan will be able to rollover its debt or secure additional financing from foreign banks, even if at a higher cost,” Farooq said.
The government and the IMF reached an agreement in July on a 37-month loan programme. However, the programme’s final approval by the IMF’s executive board remains contingent on securing timely financing assurances from Pakistan’s development and bilateral partners.
Farooq also pointed out that the market is currently undervalued when compared to the 10-year bond yield, which is now yielding 1.5pc below the earnings yield of the KSE-100 index. He expects the market to adjust to reflect this lower risk-free rate, noting that “over the last decade, the average earnings yield of the index has been slightly lower than the 10-year risk-free rate.”