The capital market experienced an up-and-down session on Friday, with the KSE-100 index surpassing the all-time mark of 115,000 points for the first time in early trading before falling back as investors capitalized on recent gains in taking profits.
The KSE-100 index of the Pakistan Stock Exchange (PSX) jumped 121.30 points, or 0.11 percent, to close at 114,301.80 points. The benchmark index also surged to an intraday high of 115,172.44, gaining 991.94 points or 0.87 percent, reflecting strong investor optimism.
However, it later declined to a low of 112,946.48, losing 1,234.02 points or -1.08%.
“The market is consolidating at current levels. Some profit taking is observed,” noted Samiullah Tariq, head of research at Pak-Kuwait Investment Company. His comments highlight a natural pause after days of intense buying activity and record rallies that propelled the market to all-time highs.
Friday’s opening hours underscore Pakistan’s strong macroeconomic fundamentals, with falling inflation, expectations of significant monetary easing and robust economic activity generating initial gains. However, the decline reflects consolidation as traders lock in profits after the index’s remarkable rise.
As the market experiences a cooling period, analysts remain optimistic about its long-term trajectory, citing falling inflation, improving liquidity and continued economic reforms as key drivers of sustained growth in the coming weeks.
Pakistan’s foreign exchange reserves remain stable at $16.6 billion as of December 6, 2024, despite a slight decline of $19 million. Reserves held by the State Bank of Pakistan (SBP) increased by $13 million to $12.051 billion – the highest since March 2022 – while commercial bank reserves declined by $32 million to reach $4.55 billion.
The country’s current account deficit (CAD) narrowed sharply by 79% year-on-year to $217 million in the first two months of fiscal 2025, with August recording a surplus of $29 million. of dollars. This improvement is supported by strong remittances, stable export earnings and increased domestic production. Exports are expected to reach $33 billion by fiscal 2025, while remittances are expected to reach $33.5 billion, supported by government incentives and reduced global inflation.
Expectations of significant monetary easing further boosted market sentiment. On Wednesday, the government cut Treasury yields by up to 100 basis points. The auction raised 1.256 trillion rupees, surpassing the target of 1.2 trillion rupees, with the biggest yield reduction of 100 basis points applied to three-month securities, bringing the rate down to 11.99 %.
Analysts widely expect the SBP to cut its policy rate by up to 200 basis points at the December 16 Monetary Policy Committee (MPC) meeting, supported by falling inflation, which has fallen to 4.9% in November, its lowest level since April 2018.
Economic activity continues to accelerate, as evidenced by a 62% year-over-year increase in passenger car sales in November and a 50% increase in the first five months of fiscal 2025. In addition, the Asian Development Bank (ADB) has approved $530 million in loans to upgrade Pakistan’s power distribution infrastructure and expand social welfare programs.
The government revised National Savings Scheme (NSS) profit rates earlier this week, with the savings account rate reduced by 250 basis points to 13.5 per cent. This is expected to redirect funds from savings instruments into equities, thereby providing additional support to market activity.
Saudi Arabia’s extension of a $3 billion deposit and trade deals worth $560 million have strengthened Pakistan’s foreign exchange reserves and boosted investor confidence. Simultaneously, the advance-to-deposit ratio (ADR) of the banking sector improved to 47.8% as of November 29, 2024, with banks aiming to achieve the mandatory threshold of 50% by December 31 to avoid penalties.
On Thursday, the KSE-100 index jumped 3,370.29 points, or 3.04 percent, to close at 114,180.50, marking the third-largest one-day one-day rally in PSX history. The index hit an intraday high of 114,408.62, reflecting unprecedented investor confidence.
With a stable macroeconomic outlook, falling inflation and anticipated monetary easing, the market is expected to maintain its upward trajectory.