- The rally progresses as investors gorge themselves on valuations.
- Analysts predict sustained growth with stabilized policies.
- November inflation figures exceeded official market forecasts.
Stocks continued their explosive upward momentum Tuesday, building on Monday’s record gains as economic optimism and slowing inflation continued to boost investor confidence.
The Pakistan Stock Exchange’s (PSX) stock benchmark KSE-100 index surged further, adding 1,284.13 points, or 1.24 percent, to hit a new high at 104,559.07.
The ongoing strong recovery reflects the impact of stabilizing macroeconomic indicators and expectations of further monetary easing.
“Moderate political uncertainty, following the sudden end of the PTI rallies and continued improvement in the macroeconomic situation, continue to drive the market,” said Muhammad Saad Ali, head of research at Intermarket Securities Ltd.
“Yesterday’s CPI inflation figures for November strengthen prospects for further rate cuts in the near future. The latter generates strong liquidity on the market.
The day’s exchanges began on a ceremonial note when Federal Minister for Planning Ahsan Iqbal rang the traditional gong to begin the exchanges at the PSX.
During the event, Ahsan Iqbal highlighted the government’s commitment to economic stability and long-term growth. “Crossing the 100,000 mark in the 100 index shows the world the potential of Pakistan,” he said.
“Inflation went from 38% to less than 5% in two years and the stock market went from 30,000 to 100,000 points,” he noted, emphasizing that the PSX is one of the most most efficient in the world.
A significant factor in today’s rally was Prime Minister Shehbaz Sharif’s optimism over a possible reduction in the policy rate by the Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) during of its next meeting, which, according to analysts, will give an additional boost to the stock markets.
Addressing a federal cabinet session on Monday, he expressed optimism over a further reduction in the SBP policy rate.
The Prime Minister highlighted that the 4.9% inflation rate recorded in November – the lowest in six and a half years – was a game-changer for the country’s economic landscape.
Inflation data released by the Pakistan Bureau of Statistics (PBS) showed a significant slowdown, beating forecasts of 5.8-6.8 percent.
“This is beyond imagination,” the prime minister said, recalling inflation levels of 3.5 per cent during the previous tenure of the Pakistan Muslim League-Nawaz (PML-N).
Analysts note that the slowdown in price pressures reflects a combination of improving monetary measures and stabilizing economic fundamentals and see this as a clear signal of easing price pressures, which could prompt the SBP to reduce raise interest rates, thereby creating a more favorable environment for stock markets.
“Stocks are bullish, led by stocks across the board, as investors eye a sharp cut in policy rates next week,” said Ahsan Mehanti, managing director and CEO of Arif Habib Commodities.
“Optimistic data on a trade deficit of $8.65 billion, down 7.4%, and exports of $13.69 billion, up 12.57% for July-November 2024 played a role. catalytic role in the record rise of PSX. »
Trade data released by the Pakistan Bureau of Statistics (PBS) further boosted the positive market sentiment. The country’s trade deficit narrowed by 7.39 percent during the first five months of the current fiscal year, standing at $8.651 billion, compared to $9.341 billion during the same period of the previous exercise.
Pakistan’s exports increased by 12.57 percent to $13.69 billion, while imports increased by 3.90 percent to $22.342 billion during this period.
In November 2024, the trade deficit improved even more significantly, narrowing by 18.60% year-on-year (yoy) to $1.589 billion, compared to $1.952 billion in the same month last year. .
Analysts view this as a positive indicator of improving economic fundamentals and sustainable trade policies, contributing to the bullish momentum of the PSX.
Monday’s session set the tone for today’s rally, with the KSE-100 gaining 1,917.62 points to close at a record high of 103,274.94.
Sectors such as banking, technology and oil and gas exploration led the gains last, with banking stocks benefiting significantly from recent regulatory changes, such as the removal of the minimum deposit rate requirement ( MDR) for company deposits.
As the PSX continues to explore unprecedented territory, market analysts expect sustained growth, supported by consistent policy measures, stabilized external accounts and reduced costs of doing business.