The Pakistan Stock Exchange (PSX) continued its bullish streak, with the KSE-100 Index surging past the 116,000-point milestone, driven by growing optimism surrounding a potential policy rate cut and improving macroeconomic indicators.
Market Performance
- The KSE-100 Index gained 1,713.48 points, or 1.5%, reaching an intraday high of 116,015.28 during early trading.
- The rally builds on last week’s record-breaking performance, reflecting sustained investor confidence.
Key Catalysts for the Rally
- Anticipated Policy Rate Cut:
- The State Bank of Pakistan (SBP) is expected to announce a rate cut of 200 to 500 basis points during the Monetary Policy Committee (MPC) meeting.
- November’s inflation rate dropped to 4.9%, creating a positive real interest rate of 10%, providing ample room for monetary easing.
- Businesses are pushing for a steep rate cut to stimulate economic growth, while analysts foresee a more measured adjustment.
- Macroeconomic Stability:
- Remittances: Increased by 29% year-on-year, reaching $2.9 billion in November.
- Foreign Reserves: Stabilized at $16.6 billion as of December 6, with SBP reserves at $12.051 billion, the highest since March 2022.
- Current Account Deficit (CAD): Narrowed by 79% year-on-year to $217 million in the first two months of FY2025.
- Shift from Savings to Equities:
- A 250 basis point cut in National Savings Schemes (NSS) returns is redirecting funds into equities, boosting PSX liquidity and trading volumes.
- Strengthening Exports and Consumer Demand:
- Exports: Projected to hit $33 billion by the end of FY2025.
- Automobile Sales: Increased by 52% year-on-year in November, showcasing robust consumer demand.
- Improved Banking and Liquidity:
- The advance-to-deposit ratio (ADR) rose to 47.8% in November, nearing the mandatory 50% threshold.
- A recent T-bill auction raised Rs1.256 trillion, with yield cuts of up to 100 basis points, further boosting liquidity.
Economic Recovery in Action
- The Asian Development Bank (ADB) approved $530 million in loans to modernize Pakistan’s power distribution network and enhance social protection.
- Passenger car sales surged 50% in the first five months of FY2025, reflecting recovering consumer purchasing power.
Looking Ahead
The PSX is expected to maintain its upward trajectory, supported by:
- A potential policy rate cut by the SBP.
- Continued macroeconomic stability, easing inflation, and improved liquidity.
- Strong export performance and rising remittances.
If the SBP delivers a significant rate cut, it could further bolster investor confidence and sustain the PSX’s positive momentum in the weeks ahead. Analysts believe the current bullish sentiment is underpinned by strong economic fundamentals and easing political uncertainties, signaling brighter prospects for the Pakistani economy.
