The Pakistan Stock Exchange (PSX) continued its upward momentum on Friday, driven by expectations of a significant interest rate cut in the upcoming Monetary Policy Committee (MPC) meeting and increased foreign buying, particularly in the cement sector.
Market Performance
The benchmark KSE-100 Index surged 1,570.29 points (1.38%), reaching an intraday high of 115,608.08, with a low of 114,383.16 recorded earlier in the session. This marked another day of strong recovery for the market.
Key Drivers
- Anticipated Interest Rate Cut:
Investors expect the State Bank of Pakistan (SBP) to announce a 100-basis-point cut in the policy rate on Monday, January 27. Declining yields on Treasury bills, which dropped by 20-41 basis points earlier this week, reinforced this expectation. - Foreign Buying:
Foreign investors have shown keen interest in the cement sector, further boosting market activity. - Positive Developments:
- A $1 billion loan secured from Middle Eastern banks.
- Optimism surrounding corporate earnings and dividend announcements during the ongoing results season.
Economic Indicators
- Inflation Decline:
Pakistan’s Consumer Price Index (CPI) for January is projected to drop to 2.8%—the lowest since November 2015. The average inflation for the first seven months of FY25 stands at 6.7%, significantly lower than last year’s 28.7%. - Foreign Exchange Reserves:
Reserves held by the SBP fell by $276 million to $11.449 billion due to external debt repayments. However, fiscal pressure was alleviated by the UAE’s rollover of $2 billion deposits for another year and new short-term loans from Middle Eastern banks.
Government and Institutional Support
- Prime Minister Shehbaz Sharif praised the World Bank’s multi-billion-dollar Country Partnership Framework for Pakistan (FY26-FY35), which aims to address critical economic and climate challenges.
- Finance Minister Muhammad Aurangzeb confirmed the signing of $1 billion in short-term loans from Middle Eastern banks, offering relief to the fiscal situation.
Looking Ahead
Market sentiment remains focused on the SBP’s monetary policy announcement on January 27. Governor Jameel Ahmad is set to disclose the decision later that day in a press conference. With inflation declining and yields falling, investors are optimistic about further monetary easing to support economic recovery.