For the second day in a row, shares at the Pakistan Stock Exchange (PSX) increased on Tuesday, with analysts attributing the recovery to a less-than-expected hike in the benchmark policy rate.
At 9:56 a.m., the benchmark KSE-100 index had risen 509.56 points, or 1.33 percent, to 38,942.79 points.
The index was responding favorably, according to Raza Jafri, Head of Equity at Intermarket Securities, because the 100 basis point interest rate hike was widely anticipated and had already been included.
“Energy stocks are leading the rally on an expected circular debt plan,” he commented.
Jafri pointed out that Jameel Ahmad, the governor of the State Bank of Pakistan (SBP), also provided a thorough breakdown of the external debt retirement in the remaining months of FY23. “The funding shortfall seems acceptable, but there is a clear need for the IMF. If the IMF program is not quickly restarted, today’s market rally could be brief, he warned.
Two further analysts claimed that the KSE-100 index was increasing primarily because the interest rate hike came in below estimates.
As anticipated by the market, the State Bank of Pakistan’s (SBP) Monetary Policy Committee (MPC) announced a 100 basis point increase in interest rates on Monday, bringing the rate to 17%. Since October 1997, the main policy rate has never been higher than it is now.
“The committee noted that inflationary pressures are persisting and continue to be broad-based. If these remain unchecked, they could feed into higher inflation expectations over a longer-than-anticipated period. The MPC stressed that it is critical to anchor inflation expectations and achieve the objective of price stability to support sustainable growth in the future,” stated MPC.
Additionally, the central bank recommended banks to offer one-time facilitation to all importers who could extend their payment terms to 180 days or arrange for money from abroad to repay their outstanding import payments in order to clear the blocked consignments at ports.
