The Pakistan Stock Exchange (PSX) witnessed a strong bullish trend on Thursday as the benchmark KSE-100 index surged by more than 1,400 points, driven by positive economic signals and market optimism.
At 11:56 AM, the index had already climbed 989.51 points (0.88%) to reach 113,243.27. By 12:35 PM, it further jumped 1,253.77 points (1.12%), reaching 113,507.53. The rally continued throughout the session, and by closing time, the index stood at 113,713.17, marking a 1,459.41-point increase (1.3%) from its previous close of 112,253.76.
Key Market Drivers
IMF Relief on Tax Targets
The rally was fueled by media reports suggesting that the International Monetary Fund (IMF) may revise tax targets downward, a move expected to ease fiscal pressures. Yousuf M. Farooq, Director of Research at Chase Securities, noted that the market responded positively to these reports, boosting investor confidence.
Finance Minister Muhammad Aurangzeb confirmed that discussions with the IMF for the first biannual review of Pakistan’s $7 billion aid package had begun. A media report indicated that the IMF might reduce the tax revenue target from Rs12.9 trillion to less than Rs12.5 trillion, citing sluggish economic activity and revenue shortfalls.
Declining Commodity Prices & Interest Rate Expectations
Farooq also highlighted that falling global oil and coal prices have led market analysts to revise their inflation projections downward. Previously, many experts expected inflation to hover around 10% by June, with the central bank maintaining interest rates. However, a continued decline in commodity prices and sensitive price index (SPI) readings has shifted expectations towards a potential interest rate cut.
Market Expectations for Monetary Policy
Sana Tawfik, Head of Research at Arif Habib Limited, attributed the rally to speculation surrounding the upcoming Monetary Policy Committee (MPC) meeting on March 10. She noted that the State Bank of Pakistan (SBP) is expected to reduce interest rates by 50 basis points, which has fueled buying activity.
Tawfik also pointed out that international oil prices have dropped, further strengthening market sentiment. Additionally, liquidity inflows from local institutions have contributed to fresh buying in stocks.
Improved Pakistan-US Relations
According to Awais Ashraf, Director of Research at AKD Securities, another factor boosting market confidence was the positive response from former US President Donald Trump.
In a rare public acknowledgment, Trump praised Pakistan for assisting in capturing a key suspect responsible for the deaths of 13 US service members. His remarks helped ease uncertainty in Pakistan-US relations, leading to improved investor sentiment.
IMF Review & Future Market Outlook
Analysts are optimistic about a successful IMF review, which could unlock additional funding for climate financing. Furthermore, the combination of:
- Reduced inflation expectations,
- Falling oil prices, and
- Encouraging trade figures
has increased chances of continued monetary easing in the upcoming monetary policy review.
Recent Market Trends
Just a day earlier, the PSX had faced volatility due to a lack of positive triggers, with profit-taking dragging the index down. Analysts attributed this slump to:
- Weak global equity markets,
- Plunging crude oil prices, and
- Uncertainty due to US trade tariffs on Canada, Mexico, and China.
However, Finance Minister Muhammad Aurangzeb’s assurance that Pakistan is “well-positioned” for the IMF review helped restore investor confidence, leading to the Thursday rally.
Pakistan’s IMF Program
Pakistan had secured a $7 billion IMF bailout in July 2023, aimed at stabilizing the economy and creating conditions for sustainable growth. A nine-member IMF delegation has now begun its first biannual review under the Extended Fund Facility (EFF).
Conclusion
With bullish momentum driving the market upward, investor sentiment remains strong. The IMF’s stance on tax targets, interest rate expectations, and stable external relations will continue to shape market performance in the coming weeks.
