The Pakistan Stock Exchange (PSX) achieved a historic milestone on Tuesday, surpassing the 117,000-point mark for the first time. The surge was fueled by strong investor confidence following the State Bank of Pakistan’s (SBP) recent policy rate cut, improving macroeconomic conditions, and growing optimism for economic recovery.
Market Performance
- KSE-100 Index: The benchmark KSE-100 Index gained 869.76 points (0.75%), hitting an intraday high of 117,039.17 before profit-taking pushed it to a low of 114,868.63.
- Investor Sentiment: According to Samiullah Tariq, Head of Research at Pak-Kuwait Investment Company, “Some profit-taking is being witnessed today as the market has increased considerably,” reflecting short-term corrections after the sustained rally.
Key Drivers of the Rally
- SBP Policy Rate Cut:
- The SBP reduced the policy rate by 200 basis points (bps) to 13%, marking its fifth consecutive rate cut.
- This shift towards an accommodative monetary policy aims to spur economic growth.
- Declining Inflation:
- Inflation dropped to 4.9% in November—the lowest since April 2018.
- Real interest rates have now turned highly positive at 10%, encouraging liquidity movement from fixed-income securities to equities.
- SBP Governor’s Outlook:
- SBP Governor Jameel Ahmed acknowledged that inflation might temporarily rise over the next 3-4 months due to base effects but projected stabilization within the 5-7% range by June 2025.
- He assured the market of foreign debt repayment capacity, backed by $16.6 billion in foreign reserves (with SBP holding $12.051 billion—highest since March 2022).
- Macroeconomic Stability:
- Remittances surged by 29% YoY in November to $2.9 billion, bolstering foreign reserves.
- The Current Account Deficit (CAD) narrowed by 79% YoY to $217 million in the first two months of FY2025.
- Projections indicate exports could reach $33 billion and remittances $33.5 billion by FY2025-end.
- Banking Sector Resilience:
- The Advance-to-Deposit Ratio (ADR) improved to 47.8% in November (up from 44.3% in October), reflecting increased lending by banks to meet mandatory targets.
- T-Bill Auction Success:
- The government raised Rs1.256 trillion through Treasury Bills, with yields on three-month papers dropping by 100bps to 11.99%—the biggest reduction in years.
- Revival of Consumer Activity:
- Passenger car sales grew by 52% YoY in November, reflecting improving demand and consumer confidence.
Recent PSX Trends
- On Monday, the PSX extended its rally, with the KSE-100 Index soaring 1,867.61 points (1.63%) to close at 116,169.41, touching an intraday high of 116,681.59.
- The consistent upward momentum reflects investor optimism, underpinned by easing inflation, fiscal reforms, and improving economic fundamentals.
Outlook
Analysts remain optimistic, projecting continued market growth as liquidity flows into equities amid:
- Lower interest rates
- Easing inflation
- Positive macroeconomic indicators
With Pakistan’s economic recovery gaining momentum, the PSX’s historic performance signals renewed confidence in the country’s growth trajectory.
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