The stocks, on Thursday, soared to an intraday high of over 88,300 points. Investors showed strong interest in rate-sensitive sectors, anticipating significant monetary policy easing from the central bank. The overall economic outlook remains upbeat, driving investor confidence.
The benchmark KSE-100 index surged by 1,125.84 points, or 1.29%, reaching 88,320.37 points around 1 PM. This marked an increase from the previous close of 87,194.53 points, highlighting a significant rally in the Pakistan Stock Exchange (PSX).
As the first-quarter (1QFY25) corporate results rolled in, investors focused on high-performing sectors. Key sectors included auto-makers, cement, commercial banks, oil and gas exploration, oil marketing, and power generation. These sectors showed strong potential for growth, attracting significant investment.
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Saad Ali, Director of Research at Intermarket Securities, commented on the PSX rally. He noted, “The PSX has been rallying since the approval of the International Monetary Fund’s (IMF) loan.” Additionally, recent political developments, such as the passage of the 26th Amendment, have further boosted market sentiment.
Interest Rate Expectations
The expectations of a 200 basis points (bps) rate cut are fueling the market rally. Ali highlighted that this anticipation has generated optimism among investors. Brokerage Arif Habib Limited (AHL) reported that the KSE-100 index surpassed the 88,000 points level, trading at an all-time high.
“This remarkable performance reflects a 41% gain CYTD (calendar-year-to-date) in 2024 and an 8.5% month-on-month increase,” AHL stated. This achievement positions the PSX as the fourth-highest performing equity market in the world.
Future Projections
The State Bank of Pakistan’s (SBP) Monetary Policy Committee (MPC) is scheduled to meet on November 4, 2024. Analysts expect a policy rate cut of 200 basis points, citing a consistent decline in inflation in recent months. Speculation has even emerged regarding a potential rate cut of up to 400 basis points by December. Analysts believe that easing measures could reignite foreign investors’ interest in Pakistan’s capital market.
Inflation has dropped to 6.9% year-on-year in September 2024, the lowest level since January 2021. This decline comes from a decrease from 9.6% in August. The reduction is attributed to several factors, including the high base effect, easing commodity and energy markets, and a stable currency, according to the Pakistan Bureau of Statistics (PBS).
In September, the SBP responded to falling inflation by slashing the key policy rate by 200bps to 17.5%, down from 19.5%. The central bank emphasized the need to address both headline and core inflation, which has decreased significantly over the past two months.