Shares at the Pakistan Stock Exchange (PSX) surged over 400 points in intraday trading on Thursday, with analysts attributing the gain to a Moody’s rating upgrade that boosted investor sentiment.
The benchmark KSE-100 index increased by 421.02 points, or 0.54%, reaching 78,413.80 points, up from 77,992.78 points at the previous close as of 10:41 am.
Awais Ashraf, Director of Research at AKD Securities, credited the upward movement to the Moody’s rating upgrade, which improved external liquidity positions and eased concerns about the delayed IMF board approval.
On Wednesday, Moody’s raised Pakistan’s local and foreign currency issuer and senior unsecured debt ratings to Caa2 from Caa3, citing improvements in Pakistan’s macroeconomic conditions and better government liquidity and external positions.
Yousuf M. Farooq, Director of Research at Chase Securities, pointed out that the KSE-100 index had faced pressure recently due to uncertainty about the IMF programme’s timing. He expressed confidence that Pakistan could secure debt rollover or additional financing from foreign banks, even at higher costs.
The government and the IMF agreed on a 37-month loan programme in July, contingent on executive board approval and confirmation of necessary financing assurances from Pakistan’s development and bilateral partners.
Farooq also highlighted that the market appears undervalued compared to the 10-year bond yield, which is currently 1.5% below the earnings yield of the KSE-100 index. He anticipates that the index will adjust to reflect a lower risk-free rate. The market is awaiting clarity on the IMF programme, with the average earnings yield of the index historically being 0.17% lower than the 10-year risk-free rate over the past decade.
