Stocks jump 1.8 percent as coalition ends political deadlock

Stocks surged on Wednesday, closing 1.8 percent higher, as investors welcomed the formation of a coalition government by two major political parties after weeks of uncertainty following a close election, dealers said.

The Pakistan Stock Exchange's benchmark KSE-100 share index ended at 61,559.16 points, up 1,094.91 points or 1.81 percent. The index had opened higher, rising as much as 900 points in early trade, after news that the Pakistan Muslim League-Nawaz (PML-N) and the Pakistan Peoples Party (PPP) had reached an agreement on Tuesday to form a coalition government in the centre. The agreement came nearly two weeks after a general election on Feb. 8 that produced a hung parliament, with no party winning a clear majority.

In the second half of the trading session, the market resorted to profit-taking, taking the benchmark to an intra-day low of 60,906.98. However, last-hour buying again pushed the index higher, helping it settle at 61,559.16 points.

"The market reacted positively to the news of the coalition government, as it removed the uncertainty and the risk of a prolonged political deadlock," said Mohammed Sohail, chief executive of Topline Securities. “Clarity on the formation of a new government in the centre after major political parties reached an agreement yesterday helped to restore investor confidence."

Analysts said that the coalition reduced the likelihood of a failure in securing a new loan programme from the International Monetary Fund (IMF), which Pakistan needs to avoid a balance of payments crisis.

The market was also supported by strong corporate earnings and attractive valuations. The market's price-to-earnings ratio, a measure of how expensive stocks are, was around 6.5, well below the historical average of 9.

Analysts expected the market to likely remain bullish in the short term, but cautioned that investors should be selective and focus on sectors that have strong fundamentals and growth prospects.

The upward movement was driven by OGDC, LUCK, PPL, UBL, and TRG, collectively contributing to an additional 322 points on the index. During the trading session, a total of 362.7 million shares were traded, with a total value of Rs12.4 billion. The total volume was 210.578 million shares.

BOP stood out as the volume leader, trading approximately 35 million shares. Pharma stocks continued to soar, with all companies included in the index hitting their upper circuit for the second consecutive session after the government relaxed drug pricing policies.

The index was supported by Oil & Gas Exploration Companies with 189.42, Commercial Banks with 188.19, Cement with 159.58, Technology & Communication with 108.29, and Pharmaceuticals with 101.68 points. The index was let down by Textile Composite with 20.41, Miscellaneous with 14.63, Automobile Parts & Accessories with 10.52, and Textile Spinning with 1.13 points.

Companies adding points to the index were OGDC with 82.41, LUCK with 69.22, PPL with 59.67, UBL with 57.18, and TRG with 53.66 points.Companies that dragged the index lower were PSEL with 29.75, ILP with 21.36, AKBL with 13.65, PKGP with 12.25 and THALL with 10.52 points. Shares of 347 companies were traded, of which 242 registered an increase, 84 recorded a fall, while 21 remained unchanged.