PSX gains over 2800 points during intraday trade after US, Iran reach preliminary agreeement

Lead

ISLAMABAD: The Pakistan Stock Exchange's (PSX) benchmark KSE-100 index gained over 4,000 points on Monday, closing sharply higher as investors reacted to a preliminary agreement between the United States and Iran aimed at ending a war that began over three months ago and crippled the world economy.

The index rose by 4,639.92 points (2.69 per cent) to close at 177,039.82, up from the previous close of 172,399.90, according to Dawn. The market dipped to an intraday low of 175,085 at 11am before reaching an intraday high of 177,176.72 at 3:25pm.

Coverage Comparison

Reports differed on the extent of the gains during intraday trade. Some accounts noted that the index had gained over 2,800 points by 11am, rising by 2,836 points (1.65 per cent) to 175,236 points from the previous close of 172,399. Later reports, however, indicated that the market continued to climb throughout the day, ultimately closing with gains exceeding 4,000 points. The final close of 177,039.82 reflected a rise of 4,639.92 points.

Dawn's coverage attributed the rally to the US-Iran agreement, which eased geopolitical tensions and raised expectations that the Strait of Hormuz would remain open. The reports also noted that oil prices opened lower, reducing concerns about inflationary pressures. Additionally, the recent federal budget, presented after market hours on the final trading day of last week, was seen as signalling fiscal discipline, with measures including a reduction in the super tax.

Key Claims

• US-Iran Agreement: The US and Iran reached a preliminary agreement aimed at ending a war that began over three months ago.
• Market Performance: The KSE-100 index closed at 177,039.82, up 4,639.92 points (2.69 per cent) from the previous close of 172,399.90, after an intraday low of 175,085 and a high of 177,176.72.
• Intraday Gains: By 11am, the index had already risen by 2,836 points (1.65 per cent) to 175,236, according to some reports.
• Analyst Comments: Yousuf M. Farooq, director of research at Chase Securities, said the market opened higher as sentiment improved following the deal, with expectations that the Strait of Hormuz would remain open. He noted that oil prices opened lower, easing inflationary concerns, and that the market's price-to-earnings multiple remained below its long-term average, with a controlled current account. Awais Ashraf, director of research at AKD Securities, also attributed the positive trend to the US-Iran agreement, adding that fiscal consolidation in the budget and the abolition of the super tax for small and medium-sized businesses supported market confidence.
• Monetary Policy: The State Bank of Pakistan announced it would keep the policy rate unchanged at 11.5 per cent.
• Previous Week's Performance: Last week, the PSX remained in positive territory, with the KSE-100 index crossing the 172,000-point mark. According to Topline Securities, the index gained 1.13 per cent week-on-week, adding 1,921 points to close at 172,400.

Perspectives

Market Analysts:

Yousuf M. Farooq of Chase Securities highlighted improved sentiment following the US-Iran deal, along with expectations of open Strait of Hormuz and lower oil prices. He noted that the market's valuation remained below its long-term average and that a sustained decline in oil prices, coupled with lower interest rates and earnings growth, could support an upward rerating.

Awais Ashraf of AKD Securities echoed these views, crediting the US-Iran agreement and the continuation of fiscal consolidation, including relief for small businesses, for boosting market confidence. He also mentioned that investors were cautious ahead of the monetary policy announcement.

Central Bank:

The State Bank of Pakistan maintained the policy rate at 11.5 per cent, a decision awaited by investors during the trading day.