The stock market opened the week on a bullish note, reflecting continued optimism among investors, driven by expectations of a cut in policy rates from the State Bank of Pakistan (SBP) and improving macroeconomic indicators.
Strong remittances, stable foreign exchange reserves and falling inflation have boosted confidence in the country’s economic recovery.
The Pakistan Stock Exchange’s (PSX) benchmark KSE-100 index climbed 1,525.14 points, or 1.33 percent, to an intraday high of 115,826.94 in early trade, building on last week’s record performance.
The market remains supported by anticipation of the Monetary Policy Committee (MPC) announcement expected later today, with expectations of a rate cut ranging from 200 to 500 basis points. Companies are advocating aggressive reduction to boost growth, while analysts predict a more measured adjustment.
The inflation rate in November fell to 4.9%, creating a positive real interest rate of 10% and substantial room for monetary easing. Investors are also encouraged by the government’s revision of National Savings Scheme (NSS) profit rates, which resulted in a 250 basis point reduction in savings account returns. The move is expected to redirect funds from savings instruments into stocks, thereby boosting market activity.
Foreign capital inflows also remain strong. Remittances rose 29% year-on-year to $2.9 billion in November, contributing to stable foreign exchange reserves of $16.6 billion as of December 6, 2024. Reserves held by the SBP increased to reach $12.051 billion, the highest since March 2022.
Meanwhile, the current account deficit (CAD) narrowed significantly by 79% year-on-year to $217 million in the first two months of FY2025, supported by strong remittances and stable export earnings.
Exports are expected to reach $33 billion by the end of fiscal 2025, while remittances are expected to climb to $33.5 billion, thanks to government incentives and easing global inflation. The economic recovery is also evident in auto sales, which jumped 52% year-over-year in November, reflecting strong consumer demand.
The banking sector continues to improve, with the advances-to-deposits ratio (ADR) rising to 47.8% in November, compared to 44.3% in October, as banks strive to reach the mandatory threshold of 50%.
Last week’s Treasury Bill (T-bill) auction raised Rs 1.256 trillion against a target of Rs 1.2 trillion, thereby increasing liquidity. Yield cuts of up to 100 basis points on Treasuries have boosted expectations of monetary easing, signaling improving conditions for businesses and investors.
Economic activity is accelerating, supported by strong investor confidence and consumer demand. Passenger car sales rose 50% in the first five months of fiscal 2025, while the Asian Development Bank (ADB) approved $530 million in loans to upgrade the country’s electricity distribution network. Pakistan and expand social protection programs.
The PSX’s performance last week, which saw the KSE-100 index cross the 114,000-point mark for the first time, reflects easing political uncertainties and strong economic fundamentals. These factors continue to support the market’s upward trajectory.
With the SBP policy rate announcement expected later today, analysts expect the market to maintain its bullish momentum.
A significant decline in rates, coupled with strong macroeconomic stability and increased liquidity, is likely to further boost investor confidence and maintain the positive trajectory of the PSX in the weeks to come.