Pakistan stock exchange remains bullish, gains 749 points in post election rally

“Locals bought in morning trade as they believe that the PTI government will not be a hung government as was expected earlier,” Mohammed Sohail, CEO of Topline Securities, told Arab News. (RIZWAN TABASSUM/AFP)

• Stock market welcomes PTI with bullish rally in morning trade
• PTI’s clear majority in general election placates investors’ concerns of hung government, say analysts

KARACHI: The Pakistan Stock Exchange PSX reacted positively on Thursday following clear victory of Pakistan Tehreek-e-Insaf PTI-led by former cricketer Imran Khan in general elections.
The benchmark KSE 100 index closed 749 points or 1.8 percent higher at 42089 level.
In the morning trade the benchmark KSE 100 index opened 2 percent bullish as investors’ fears of hung government dissipated.
“Locals bought in morning trade as they believe that the PTI government will not be a hung government as was expected earlier,” Mohammed Sohail, CEO of Topline Securities, told Arab News.
The majority analysts and stock brokers were expecting the PTI to capitalize on difficulties facing the outgoing government of the Pakistan Muslim League Nawaz (PMLN) following the conviction and imprisonment of former Prime Minister Nawaz Sharif, possibly putting the PTI in a position to form the next government.
Unofficial results show that PTI secured around 119 National Assembly seats and will be able to form a coalition government with smaller parties and independents. The markets had expected the PTI to win between 85 and 95 seats.
Incomplete unofficial results suggest that the former ruling party has been able to grab 61 seats.
“Peaceful general elections and the likelihood of strong government are the two positives that the stock market is seeing at the moment. While the market might keep on celebrating a PTI clear victory for few days, I think, in two to three months’ time, much will depend on the effectiveness of economic steps, the path (followed by the) new government to control the economic deterioration,” Zeeshan Afzal, Executive Director Research at Insight Securities told Arab News.
Analysts commented that the market is reacting positively due to PTI winning with clear majority. Ahsan Mehanti, Chief Executive of Arif Habib Group, told Arab News: “The direction of the stock market will remain positive in the coming days.” 
The next government will face tremendous pressure to steer the country out of its vulnerable economic position and persistent foreign selling.
“We believe that a clear mandate at the federal level is a material positive for domestic equities. Tough economic decisions have to be made in the near term as the incoming government negotiates a new International Monetary Fund program,” Nauman Khan, head of research at Foundation Securities, told Arab News.
“Economic reforms at the heart of the program would once again include privatization, restructuring public sector enterprises (PSEs), broadening the tax base, improving the investment climate, resolving energy issues, and reducing untargeted subsidies.
“A strong mandate was essential for the new government to carry out these reforms,” he added.
Pakistan’s stock market was declared the best-performing Asian bourse in 2016 when investors got stunning returns of 46 percent. The benchmark index was able to hit an all-time high of 52,876 by the middle of last year, before the political turmoil that turned it from the best to worst performing market.
Imran Khan, who is pitching himself as the next prime minister of Pakistan, will have his work cut out for him if he is to form a government and fix the ailing economy.
Khan’s party has promised 10 million jobs, five million houses and a robust tax regime. He will have to contend with the country's debt, the devaluation of the rupee and previous failed policies.