KARACHI: The Pakistan Stock Exchange (PSX) extended its rally on Tuesday, with the KSE-100 Index breaching the 117,000-point mark for the first time, driven by investor optimism following the State Bank of Pakistan’s (SBP) policy rate cut. The benchmark index climbed 869.76 points, or 0.75%, to reach an intraday high of 117,039.17 before settling slightly lower.
The upward momentum came on the heels of the SBP’s decision to slash its policy rate by 200 basis points to 13%, marking its fifth consecutive cut in a bid to spur economic growth. The move, coupled with improving macroeconomic indicators, has reignited interest in equities as investors shift liquidity from fixed-income instruments.
“Some profit-taking is being witnessed today as the market has increased considerably,” said Samiullah Tariq, Head of Research at Pak-Kuwait Investment Company, reflecting a mix of optimism and caution in the market.
Macroeconomic Boost
The SBP’s rate cut was prompted by a sharp decline in inflation, which dropped to 4.9% in November — its lowest level since April 2018. With real interest rates now standing at a positive 10%, analysts predict sustained activity in the equity market.
SBP Governor Jameel Ahmed, speaking on a TV programme, expressed confidence in the medium-term inflation target of 5-7% by June 2025, despite acknowledging a potential short-term rise due to base effects. He assured that the full impact of the rate cut would be realized over the next four to six quarters, bolstering economic recovery.
Economic Indicators Improve
Investor confidence has also been buoyed by robust macroeconomic stability.
- Foreign Reserves: SBP reserves climbed to $12.051 billion as of December 6, the highest since March 2022.
- Remittances: November saw a 29% year-on-year surge in remittances, reaching $2.9 billion.
- Current Account Deficit: The CAD fell sharply by 79% year-on-year, narrowing to $217 million in the first two months of FY2025.
- Exports and Banking Sector: Exports are projected to rise to $33 billion, while remittances are expected to hit $33.5 billion by the end of FY2025. The Advance-to-Deposit Ratio (ADR) improved to 47.8% in November, reflecting a healthier banking sector.
Market Performance and Future Outlook
The government’s recent Rs1.256 trillion Treasury Bill auction saw significant yield cuts, further supporting investor sentiment. Meanwhile, passenger car sales rose 52% year-on-year in November, indicating a revival in consumer demand.
On Monday, the PSX had already set a new milestone above 116,000, gaining 1,867.61 points, or 1.63%, to close at 116,169.41. Analysts remain optimistic, expecting the SBP’s rate cut and ongoing economic stability to sustain market momentum in the coming weeks.
The continued rally underscores investor confidence in Pakistan’s improving economic fundamentals, signaling a brighter outlook for the stock market and the broader economy.
