‘Relief rally’: PSX mimics global markets, rebounds after yesterday’s plunge

Updated 03 Nov 2020


The Pakistan Stock Exchange rebounded on Tuesday after beginning the week on a tumultuous note. — AFP/File
The Pakistan Stock Exchange rebounded on Tuesday after beginning the week on a tumultuous note. — AFP/File

The benchmark KSE-100 gained as much as 1,387 points, or 3.5 per cent, in intra-day trade on Tuesday as an uptick in oil prices, rally in international markets and lower-than-expected inflation figures for October lifted the overall market sentiment.

Today's rise comes after two days of panic selling – brought on about by fears of new lockdowns to combat rising coronavirus cases – during which the benchmark index lost a combined 2,678 points.

But around half of those losses were reversed today, with the KSE-100 closing 1,368 points in the green at 40,480 – up 3.5 per cent for the day. Commercial banks and cement stocks were among the top gainers.

“The market witnessed a relief rally after the recent bloodbath. Sentiments improved as both international oil prices and international markets recovered sharply overnight,” said Topline Securities Chief Economist Syed Atif Zafar while speaking to Dawn.

He further added that inflation figures released by the Pakistan Bureau of Statistics were slightly lower than estimated but today's rally cannot be attributed to that alone as the figure was "still on the higher side".

Inflation in October eased to 8.9 per cent compared to 9pc in September owing to a slight decrease in food prices. The figures were below market expectations as analysts had forecast the monthly price increase to clock in above the 9pc mark.

According to Mohammad Sohail of Topline Securities, the rally being witnessed today was in line with global markets while additional support was lent by the rise in crude prices which in turn supported oil stocks.

Oil prices gained nearly 3pc on US election day amid a recovery in global financial markets on Tuesday.

Brent crude LCOc1 futures rose 70 cents, or 1.8pc to $39.67 a barrel at 0845 GMT, while US West Texas Intermediate crude CLc1 futures were up 78 cents, or 2.1pc, to $37.59 a barrel, according to a Reuters report.

Meanwhile, Ali Asghar Poonawala, Deputy Head of Research at AKD Securities, attributed today's rise to a "pull back" where investors were buying into the decline expecting to book gains as stocks gain momentum.

"This implies that yesterday's move was erratic and the market oversold," Poonawala said.

"This pull back has been made possible in large part by robust improvements in reported earnings and payouts for the outgoing July-September 2020 quarter, with payouts in particular driving performance till ex-dividend dates," he added.

Asian markets follow Wall Street higher ahead of election

Asian stock markets followed Wall Street higher on Tuesday as investors watched for US election results, hoping a win by challenger Joe Biden in the presidential race might lead to more economic stimulus.

Benchmarks in Shanghai, Hong Kong, Seoul and Sydney advanced. Japanese markets were closed for a holiday.

Traders are betting that Biden might push for a bigger US stimulus if he unseats US President Donald Trump. That would require support in the Senate, which is controlled by Trump’s Republicans. Some incumbents, also up for re-election this week, face challengers from Biden’s Democratic Party.

On Monday, Wall Street closed higher amid indications Biden might be leading.

Many investors expect a “Democratic sweep, which is the key to unlocking Congress’s ability to deliver significant fiscal stimulus,” said Stephen Innes of Axi in a report.

The Shanghai Composite Index rose 1.1 per cent to 3,271.71 and the Hang Seng in Hong Kong added 2pc to 24,956.10. The Kospi in Seoul gained 1.7pc to 2,339.29.

In Sydney, the S&P-ASX 200 rose 2.3pc to 6,087.80 after the Reserve Bank of Australia (RBA) cut its key interest rate by 0.15 percentage point to a record low 0.1pc. The rate cut was expected.

The central bank governor, Philip Lowe, said the RBA was committed to doing what it can to create jobs. The Australian economy contracted during the first half of the calendar year, although Lowe said he expects official data will reveal some growth in the September quarter.

India’s Sensex opened up 0.9pc at 40,131.45. New Zealand and Southeast Asian markets advanced.

Investors have swung between optimism the global economy was coping better with the coronavirus pandemic and unease that US legislators have failed to approve new aid after expanded unemployment benefits that supported consumer spending expired.

Traders appear to be hoping a win by Biden and Democrats in the Senate might break the deadlock.

Markets are uneasy about rising infection rates in Europe, which are prompting more governments to reimpose restrictions on travel and business.

On Wall Street, the benchmark S&P 500 index rose 1.2pc to 3,310.24. The Dow Jones Industrial Average gained 1.6pc to 26,925.05. The Nasdaq composite picked up 0.4pc,to 10,957.61.

Also this week, the US Federal Reserve is due to announce its latest decision on interest rates on Thursday.

The US Labor Department releases its monthly jobs report the following day. About 130 companies in the S&P 500 are scheduled to report results this week.

Investors worry that a contested election would mean it could be weeks before the winner of the White House is certain.

Which party gets control of the Senate may be just as important as the presidency. If Democrats can gain complete control of Washington, many investors expect them to deliver a big dose of support for the economy.

Democrats and Republicans have been haggling about a stimulus renewal for months, since the last round of supplemental benefits for laid-off workers and other stimulus expired. But a deep partisan divide has so far stymied progress.

Investors and economists alike say the economy needs fresh stimulus, particularly when coronavirus counts are accelerating at troubling rates across Europe and much of the United States.

Such worries helped drive the S&P 500 to a 5.6pc loss last week. That was its worst since March.

In other trading, benchmark US crude oil added five cents to $36.86 per barrel in electronic trading on the New York Mercantile Exchange. It gained $1.02 on Monday to $36.81 per barrel. Brent crude, the international standard, was unchanged at $38.97 per barrel.

The US dollar was nearly unchanged at 104.74 Japanese yen, compared with 104.75 yen late on Monday. The euro weakened to $1.1652 from $1.1658.

Additional reporting by AP