PSX rises nearly 4,700 points on wild relief shopping spree

Stocks rebounded with a vengeance on Wednesday, paring their losses in the last session, as political tensions eased after Pakistan Tehreek-e-Insaf (PTI) “shelved” its three-day protest in Islamabad after law enforcement agencies launched a massive operation to seize Islamabad. Deleted almost all of it. Protesters were escorted out of the federal capital.

At the close a day after the bloodbath, the benchmark KSE-100 Equity Index of the Pakistan Stock Exchange (PSX) rose to 99,269.25, up 4695.09 points or 4.96% from the previous close.

Shares rose a staggering 4,975.65 points, or 5.26%, to an intraday high of 99,549.8; This reflects resurgent sentiment, according to one analyst, the biggest single-day gain in five months.

The market crashed by over 3,500 points on Tuesday when PTI’s march to Islamabad turned violent, angry protesters clashed with riot police and at least three Rangers and two police personnel were martyred, according to government officials.

Meanwhile, PTI claimed eight of its members lost their lives.

Muhammad Sohail, CEO of Topline Securities, explained the rapid recovery as follows: “The market is completely back to normal. With reports confirming that the protests are over, investors who sold yesterday are now in buying mode.”

“Within 10 minutes of trading, the index started rising and compensated for the market loss of around Rs 450-500 billion suffered on Tuesday,” he added.

Predicting cautious optimism going forward, Sohail said it will take a few more days for the market to fully stabilize as investors are treading on eggshells while re-establishing their positions after Tuesday’s shakeup.

“According to our report, we predict that the market could reach 127,000 points next year.”

While it is still difficult to predict when the market will cross the 100,000 mark, the Topline executive said that given current trends it is quite likely that this milestone will be reached this month or next month.

The rally was in response to PTI’s announcement to temporarily cancel the “do or die” protest that has paralyzed the federal capital since November 24.

The suspension followed a crackdown by law enforcement agencies that dispersed protesters from Islamabad’s Red Zone.

“In light of the government’s brutality and plans to turn the federal capital into a ‘slaughterhouse’ for unarmed citizens, we announce the temporary suspension of our peaceful protest,” PTI said in a press release by its central media cell.

The party added that future actions will be announced after consulting Imran Khan.

The waning of political unrest led to a relief rally as investors previously wary of prolonged instability regained confidence and re-entered the market.

Muhammad Saad Ali, Director of Research at Intermarket Securities, attributed the market’s performance to the improvement in investor confidence: “The market is staging a relief rally today following the news that PTI protests have been suppressed by the government. The market has recovered yesterday’s huge losses almost completely.”

“Banks are also supporting the rally,” he added. “Yesterday’s removal of MDR on some non-retail deposits is a big positive for large traditional banks, which are likely to support their earnings and payouts in 2025 amid falling interest rates.”

The banking sector was the main driver of the rally, benefiting from the State Bank of Pakistan’s (SBP) removal of the Minimum Profit Rate (MPR) requirement on deposits from financial institutions, public sector enterprises and public limited companies.

This decision, announced on Tuesday, strengthened traditional banks by easing the burden of mandatory deposit reserves and increasing profitability.

Previously, commercial banks were required to pay a minimum profit rate based on the SBP repo rate on all savings deposits. The removal of this requirement marks a change in banking policy aimed at facilitating large depositors and promoting fair banking practices.

Analysts predict that repealing the MPR will strengthen earnings and payouts for major banks in 2025, especially as interest rates fall.

Additionally, the cancellation of fees arbitrarily imposed on large accounts with deposits exceeding Rs 1 billion has provided further relief to depositors.

SBP’s decision is in line with its efforts to increase transparency and protect the interests of both banks and depositors.

By relaxing these requirements, the central bank aims to create a more balanced and competitive banking environment.