The capital market extended its upward trajectory on Tuesday, exceeding the 117,000 point mark for the first time. Investor optimism remained strong, supported by the State Bank of Pakistan’s (SBP) policy rate cut yesterday, improving macroeconomic indicators and expectations of a sustained economic recovery.
The Pakistan Stock Exchange’s (PSX) benchmark KSE-100 index gained 869.76 points, or 0.75 percent, to hit an intraday high of 117,039.17 in early trade. The index touched a low of 114,868.63 before recovering.
“There is some profit-taking today as the market has risen significantly,” said Samiullah Tariq, head of research at Pak-Kuwait Investment Company, reflecting investor sentiment after the recent rise.
The SBP’s decision to cut the policy rate by 200 basis points (bps) to 13% has sparked renewed interest in stocks. The state bank’s move marks the fifth consecutive rate cut, signaling an accommodative monetary policy aimed at boosting economic growth.
The policy adjustment was driven by a sharp decline in inflation, which fell to 4.9% in November, the lowest level since April 2018. With real interest rates now very positive at 10%. , analysts expect liquidity to shift from fixed income to fixed income instruments. stocks, which significantly boosted market activity.
SBP Governor Jameel Ahmed speaking on Geo News “Aaj Shahzeb Khanzada Kay Saath”, acknowledged that inflation may rise temporarily over the next three to four months due to base effect and pipeline factors.
He, however, expressed confidence that inflation would stabilize within the medium-term target range of 5-7% by June 2025. He noted that the full impact of the reduction in the policy rate would materialize over the next four years. to the next six quarters, stimulating economic recovery and growth.
Ahmed further assured investors of Pakistan’s capacity to meet its external debt obligations, supported by foreign exchange reserves amounting to $16.6 billion as of December 6, 2024. Of this, the reserves of the SBP climbed to $12.051 billion, marking the highest level since March 2022.
Investor optimism continues to be reinforced by improving macroeconomic stability. Remittances jumped 29% year-on-year in November to $2.9 billion, contributing to foreign exchange reserves and economic stability.
The current account deficit (CAD) narrowed sharply, falling 79% year-on-year to $217 million in the first two months of fiscal 2025. This improvement was supported by large remittances of funds and stable export earnings.
Exports are expected to reach $33 billion by the end of fiscal 2025, while remittances are expected to reach $33.5 billion, thanks to decreasing global inflation and government incentives encouraging channels formal remittances.
The banking sector also showed resilience, with the advance-to-deposit ratio (ADR) improving to 47.8% in November from 44.3% in October. This improvement reflects banks’ efforts to meet mandatory lending targets to avoid additional taxation.
Moreover, the successful auction of Treasury Bills (T-bills) organized by the government last week raised Rs 1.256 trillion. The yield reductions included the largest reduction of 100 basis points (bps) for three-month securities, lowering the rate from 12.99% to 11.99%. Six-month securities saw a reduction of 89 basis points to 11.99%, while the yield on 12-month securities was reduced by 5 basis points to 12.3%.
Signs of economic recovery remain evident, particularly in consumer activity. Passenger car sales rose 52% year-on-year in November, while cumulative growth for the first five months of fiscal 2025 stood at 50%, underscoring a recovery in demand and consumer confidence. consumers.
The stock market extended its record frenzy on Monday on an aggressive hunt for value, helping the KSE-100 index take another step above 116,000. The KSE-100 stock index gained 1,867, 61 points, or 1.63%, to close at 116,169.41, after hitting an intraday high of 116,681.59 points.
The PSX’s continued rally reflects strong investor sentiment, supported by declining inflation, improving macroeconomic indicators and fiscal reforms.
Analysts remain optimistic that the SBP interest rate cut, combined with continued economic stability and liquidity inflows, will maintain the market’s bullish momentum in the coming weeks.