Stocks rallied on Tuesday, rising more than 500 points in the early morning trade after starting the week in the red. The benchmark KSE-100 index increased 536.04 points, or 1.25 percent, by 10:10 a.m. to reach 43,362.70 points.
The Pakistan Stock Exchange (PSX) was “surprised” by the Monetary Policy Committee’s (MPC) decision to maintain the policy rate at 15 percent for the ensuing two months, according to First National Equities Limited Chief Executive Ali Malik, and investor confidence has risen as a result.
“It is anticipated that the market will begin to rise from this point. The market may hit 45,000 points in the upcoming days if political stability is maintained, he said.
Malik added that the continuous increase in the volume of shares being traded at the PSX was an indicator that investors were making fresh entries.
Raza Jafri, the head of research at Intermarket Securities, pointed out that the MPC’s decision to keep its interest rate was the first pause since the start of monetary tightening in September of last year.
He continued, “Politics remains noisy in the background, but increasing confidence in the economic future is bringing valuations into focus, which remain undeniably low.
Monetary policy
The State Bank of Pakistan (SBP) had earlier said that it was advisable to hold off on raising interest rates at this time because recent inflation trends had been in line with expectations, domestic demand had started to slow down, and the external position had begun to improve.
In a statement, it added that “severe fiscal consolidation is anticipated for FY23” and that “temporary administrative procedures have recently been implemented to curb imports” in order to calm the overheating economy and control the current account deficit (CAD).
Since the last meeting, the SBP has highlighted that headline inflation increased further in July, reaching 24.9 percent, with core inflation also increasing.
The SBP predicted that the withdrawal of the energy subsidy package will continue to show up in inflation results for the rest of the fiscal year, as well as a trend in the prices of dietary staples and last month’s exchange currency weakness.
The central bank believes the expected inflow of $1.2 billion from the International Monetary Fund will work as a catalyst for financing from multilateral and bilateral lenders.
Overall, the SBP stated that given Pakistan’s relatively small export share and foreign private inflows into the economy, a slight slowdown in global growth would not be as detrimental to the country as it would be for most other emerging nations.
As a result, as global commodity prices decline, both inflation and the CAD should decrease, while growth would not be as negatively impacted, according to the SBP.
