The stock market continued its climb to cross the 108,000 point mark on Thursday, driven by a buying frenzy, growing anticipation of a substantial cut in interest rates at the Bank’s next monetary policy meeting State of Pakistan (SBP) on December 16, historically low inflation and strengthening economic indicators.
The benchmark KSE-100 index of shares of the Pakistan Stock Exchange (PSX) climbed 3,134.63 points, or 2.98 per cent, to close at 108,238.96 points, after hitting an intraday high of 108 345.98 points.
“Strong liquidity, stable macroeconomic indicators, anticipated rate cut in December MPC and low perceived political risk are all factors driving the market,” said Muhammad Saad Ali, head of research at Intermarket Securities Ltd . feeling,” he added.
PSX reached another milestone by reaching its highest market activity in almost 19 years, with a traded value of 63 billion rupees ($227 million). This is the highest activity in the regular market since April 17, 2006, highlighting the strength of investor interest and liquidity.
Finance Minister Mohammad Aurangzeb also reaffirmed the government’s commitment to economic stabilization through structural reforms and adherence to the International Monetary Fund (IMF) programme.
Speaking at an event in Islamabad, Aurangzeb highlighted that the current account deficit had narrowed, inflation had fallen to its lowest level in 70 months and the country’s economy was showing signs of recovery.
The Finance Ministry also reported an improvement in financial stability, attributed to ongoing reforms.
As inflation continues to fall, expectations are rising for further monetary easing, signaling a more encouraging economic outlook.
The SBP has already cut interest rates by 700 basis points (bps) in four consecutive meetings since June, taking the rate to 15%. Experts widely expect another significant reduction, with most forecasting a cut of at least 200 basis points.
A survey by Topline Securities found that 71% of respondents expect a minimum cut of 200 basis points, with 63% predicting exactly 200 basis points, 30% expecting 250 basis points and 7% expecting a greater reduction.
The case for monetary easing is supported by November consumer price index (CPI) inflation, which stood at 4.9%, its lowest level in 78 months and well below the 5-7% SBP target range.
“This figure places inflation significantly below target, leaving substantial room for further rate cuts,” Topline Securities noted.
The decline in inflation is attributed to faster food disinflation and negative adjustments in electricity prices. Analysts expect inflation to remain in the single digits in the coming months, maintaining a favorable environment for monetary easing.
Trade data released by the Pakistan Bureau of Statistics (PBS) further boosted market sentiment. Pakistan’s trade deficit narrowed by 7.39 per cent in the first five months (July-November) of the current fiscal year to $8.651 billion, compared to $9.341 billion during the same period last year.
Exports increased by 12.57 percent to $13.69 billion, while imports increased by 3.90 percent to $22.342 billion. The November trade deficit narrowed further, falling 18.60% year-on-year to $1.589 billion, compared to $1.952 billion in November 2023.
Thursday’s rally follows an impressive session on Wednesday, during which the KSE-100 stock index climbed 545.26 points, or 0.52 percent, to close at 105,104.33 points after hitting an intraday high of 105,473.56 points.