The stock market extended its record-breaking run on Friday, crossing the 109,000-point milestone.
The rally was driven by strong macroeconomic fundamentals, including an increase in Pakistan’s foreign reserves, a sharp decline in inflation, strong market liquidity, and rising optimism ahead of the next monetary policy adjustment.
The Pakistan Stock Exchange (PSX)’s SE 100 index closed at 109,478.08 points, up 814.99 points or 0.75 percent from the previous close of 108,238.96 points.
The impressive rally reflects a week of rapid growth for PSX, which crossed the 100,000 mark just seven days ago.
Arif Habib Commodities Managing Director and CEO Ahsan Mahanti said: “The bullish market trend has been led by selected stocks in the oil and banking sectors, ahead of the SBP’s key policy rate announcement next week. It is due to speculation.”
“The $3 billion Saudi deposit rollover, rupee stabilization, and encouraging economic indicators have played a catalytic role in this new record in the PSX,” he added.
According to the State Bank of Pakistan (SBP), Pakistan’s total liquid foreign reserves reached $16.6 billion as of November 29, 2024.
These reserves include $12 billion held by the State Bank, which increased by $620 million during the week, driven by an official inflow of $500 million from the Asian Development Bank (ADB).
Additionally, the Saudi Fund for Development (SFD) extended the maturity of the $3 billion deposit for another year on December 5, 2024.
The expansion followed a meeting between Prime Minister Shahbaz Sharif and Saudi Crown Prince Mohammed bin Salman during the “One Water Summit” in Riyadh.
Sana Tawfiq, head of research at Arif Habib Limited, said, “Expectations of a 150-200 basis point rate cut and an exit from fixed income funds due to increased liquidity in equities are the reasons for the continuation of the bullish trend. ” “Also, lower market multiples leave more upside.”
Meanwhile, another reason for the market’s rise is the inflation rate, which fell to 4.9 percent in November, its lowest level since 2017, giving room for further monetary easing. This marks a sharp decline from last year’s all-time high of 38% and is well below the State Bank’s target range of 5-7%.
Analysts widely expect the SBI to cut interest rates by at least 200 basis points at its December 16 meeting, bringing the total cut since June to 900 bps.
As the PSX approaches the 110,000 point, market analysts are optimistic about continued growth.
With strong economic indicators, rising reserves, and the prospect of a significant rate cut, capital markets are positioned for continued momentum in the final weeks of 2024.