The Pakistan Stock Exchange (PSX) experienced a significant recovery on Wednesday, driven by favorable macroeconomic developments and renewed investor confidence.
Key Market Highlights
- KSE-100 Index Performance:
- The benchmark KSE-100 Index surged 1,376.02 points (1.2%) in early trading, reaching an intraday high of 116,236.7.
- This recovery follows a volatile session on Tuesday, where profit-taking led to a loss of 1,308.73 points, closing at 114,860.68.
- Investor Sentiment:
- Renewed optimism is fueled by Pakistan’s record-breaking current account surplus and other encouraging economic indicators.
Economic Drivers Behind Market Momentum
- Current Account Surplus:
- Pakistan posted a $729 million surplus in November 2024, marking the highest monthly surplus since February 2015 and the fourth consecutive month in surplus.
- The five-month fiscal year-to-date surplus stands at $944 million, a stark contrast to the $1.67 billion deficit during the same period last year.
- Foreign Direct Investment (FDI):
- FDI increased 31% YoY, reaching $1.124 billion in the first five months of FY2025, with November contributing $219 million.
- Key investment sources include China, Hong Kong, and the UK, with significant investments in power and financial sectors.
- Remittance Growth:
- November remittances increased 29% YoY to $2.9 billion, while cumulative inflows for FY2025 reached $14.8 billion, supported by government incentives and stable forex reserves.
- Monetary Easing and Inflation:
- The State Bank of Pakistan (SBP) recently reduced the policy rate by 200 basis points to 13%, marking the fifth consecutive cut this year.
- Inflation fell to 4.9% in November, its lowest level since April 2018.
- Stable Forex Reserves:
- Total reserves stand at $16.6 billion, with the SBP holding $12.051 billion. SBP Governor Jameel Ahmad projects reserves to exceed $13 billion by the end of FY2025.
Outlook for the Market
Analysts remain optimistic about the market’s trajectory:
- Positive Drivers:
- Ongoing monetary easing, favorable trade balances, and rising foreign investments provide a solid foundation for sustained growth.
- Short-Term Risks:
- Volatility may persist due to periodic profit-taking, as witnessed in recent sessions.
As the government continues implementing economic reforms and promoting investor-friendly policies, the PSX is expected to retain its upward momentum, attracting both domestic and international investors.
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