The stock hit another milestone by crossing the 116,000-point mark for the first time in early trade, reflecting sustained investor optimism based on expectations of a policy rate cut by the State Bank of Pakistan (SBP). does
Improvements in macroeconomic indicators such as robust remittance inflows, stable foreign reserves, and declining inflation have bolstered confidence in the country’s economic recovery.
The benchmark KSE-100 index of the Pakistan Stock Exchange (PSX) rose 1,713.48 points, or 1.5 percent, to an intraday high of 116,015.28 in early trade, building on last week’s record-setting performance.
Markets are buoyed by anticipation of the Monetary Policy Committee (MPC) announcement scheduled for later today, with expectations for a rate cut of 200 to 500 basis points. Businesses are advocating aggressive cuts to spur growth, while analysts predict more measured adjustments.
November inflation fell to 4.9%, leaving a positive real interest rate of 10% and plenty of room for monetary easing. Investors have received further encouragement from the government’s revision of National Savings Scheme (NSS) interest rates, which saw a 250 basis point reduction in savings account returns. The move is expected to redirect funds from savings instruments into equities, boosting market activity.
Foreign inflows are also strong. Remittances rose 29 percent year-on-year to $2.9 billion in November, adding to stable foreign reserves of $16.6 billion as of December 6, 2024. SBP’s reserves rose to $12.051 billion, the highest since March 2022.
Meanwhile, the current account deficit (CAD) narrowed significantly by 79 percent year-on-year to $217 million during the first two months of fiscal 2025, supported by strong remittance inflows and stable export earnings. .
Exports are estimated to reach $33 billion by the end of FY2025, while remittances are forecast to reach $33.5 billion, driven by government incentives and lower global inflation. The economic recovery is also evident in automobile sales, which rose 52 percent year-on-year in November, reflecting strong consumer demand.
The banking sector continues to show improvement, with the advance-to-deposit ratio (ADR) rising to 47.8% in November from 44.3% in October, as banks strive to meet the mandatory 50% threshold.
Last week’s Treasury Bill (T-bill) auction fetched Rs 1.256 trillion against the target of Rs 1.2 trillion, further adding to liquidity. A drop in yields on T-Bills of up to 100 basis points has bolstered expectations of monetary easing, signaling better conditions for businesses and investors alike.
Economic activity is growing rapidly due to strong investor sentiment and consumer demand. Passenger car sales increased by 50 percent in the first five months of fiscal 2025, while the Asian Development Bank (ADB) announced a $530 million loan to modernize Pakistan’s power distribution network and expand social security programs. Loans approved.
The PSX’s performance last week, which saw the KSE-100 index breach the 114,000-point barrier for the first time, reflected easing political uncertainty and strong economic fundamentals. These factors continue to support the market’s upward momentum.
With the SBP policy rate announcement expected later today, analysts expect the market to maintain its bullish momentum.
A significant rate cut, along with strong economic stability and improved liquidity, is likely to further boost investor confidence and sustain the PSX’s positive momentum in the coming weeks.