Stocks extended their record-setting streak on Wednesday, crossing the 105,000-point mark for the first time, following a significant interest rate cut by the State Bank of Pakistan (SBP) at its December 16 monetary policy meeting. Given the expectations of
The benchmark KSE-100 index of the Pakistan Stock Exchange (PSX) rose 735.32 points or 0.70 percent to touch a new intraday high of 105,294.39, reflecting continued confidence in the market’s upward momentum.
The KSE-100’s record-breaking run reflects growing optimism around the economy as inflation continues to decline, creating room for further monetary easing.
Wednesday’s session follows Tuesday’s impressive rally when the market gained 1,284 points to close at 104,559.07.
The SBI has already cut interest rates by 700 basis points (bps) in four consecutive meetings since June, bringing the rate to 15 percent.
Experts expect another substantial cut, possibly of 200 bps, at the next policy meeting as inflation settles to its lowest level in six years.
CPI inflation for November came in at 4.9%, well below the SBP’s target range of 5-7%. With inflation expected to remain in the single digits, the current policy rate of 15% provides significant scope for further rate cuts.
A survey conducted by Topline Securities showed that 71% of respondents expected a minimum cut of 200 bps, 63% predicted exactly 200 bps, 30% expected 250 bps. , and 7% expected a decline of more than 250 bps.
The reading puts inflation at a 78-month low, bolstering the possibility of a rate cut. The reason for this decrease is the sharp decrease in food supply and the negative adjustment in electricity prices.
Trade data released by the Pakistan Bureau of Statistics (PBS) also supported positive investor sentiment.
Pakistan’s trade deficit during the first five months of the current fiscal year (July-November) decreased by 7.39 percent to $8.651 billion from $9.341 billion during the same period last year.
During the period, exports increased by 12.57 percent to $13.69 billion, while imports increased by 3.90 percent to $22.342 billion. The November trade deficit narrowed further, narrowing by 18.60 percent year-on-year to $1.589 billion in November 2023, compared to $1.952 billion in November 2023.
A significant drop in inflation, which reached 38 percent last year, has restored investor confidence.
After the 200 bps rate cut, the real interest rate will still remain at 810 bps, higher than Pakistan’s historical average of 200-300 bps.
CPI inflation for November stood at 4.9% year-on-year, up from 7.2% in October and 29.2% in November 2023.
Marking a sharp turnaround, the average inflation rate during the first five months of FY25 was 7.88 percent, compared to 28.62 percent in the same period of FY24.
Wednesday’s gains extended the PSX’s streak of record-breaking sessions, with the KSE-100 index surpassing the 105,000-point mark for the first time.
Market analysts attribute the rally to macroeconomic indicators, strong trade performance, and expectations of further monetary easing.
As the December 16 SBP meeting approaches, investors’ focus remains on a possible policy rate adjustment.
With inflation continuing to decline and macroeconomic stability improving, the PSX appears poised for sustained growth, continuing its historical performance.