Despite continued political turmoil and economic challenges dominating the headlines, the Pakistan Stock Exchange (PSX) crossed the 100,000-point mark on Thursday, marking an unprecedented milestone.
The KSE-100 index, the PSX’s benchmark, climbed 1,077.25 points or 1.09% to an intraday peak of 100,346.50, with analysts predicting further gains.
According to market experts, this remarkable success is due to a number of factors, especially the government’s commitment to key economic reforms.
The historical milestone of the KSE-100 index shows a 60% year-to-date gain driven by a mix of 47% capital gains and 13% dividend yield.
Major contributors included commercial banks, fertilizers, and oil and gas exploration, while top stocks such as Fuji Fertilizer and United Bank Ltd contributed significantly.
To uncover additional reasons, we consulted analysts to gain insight into the factors that led the market to this historic milestone.
‘Rating Upgrade’
Economist Khurram Shahzad said policy efforts to turn fiscal and external accounts into surpluses and the reduction in the cost of doing business contributed to boosting investor sentiment.
Shahzad, who is also an adviser to Finance Minister Muhammad Aurangzeb on economic and financial reforms, said the cost of doing business reduction was due to a sharp reduction in policy interest rates, a stable rupee and the IMF’s successful SBA. This was followed by a large and prolonged IMF program.
Moody’s rating upgrade and a positive outlook on the economy are also some of the reasons for the rise in equities, the adviser added.
‘Consistency in the IMF Programme’
Samiullah Tariq, head of research at Pak-Kuwait Investment Company, said Thenews.com.pk That output cuts and low inflation expectations are also driving the market.
The analyst noted that a key factor driving the market’s upward momentum is the government’s continued restraint on the International Monetary Fund (IMF) program.
Expectations of increased mutual fund investment in equities contributed to the rise in the index, Tariq added.
‘Political noise eases, rupee stabilizes’
Arif Habib Corporation’s Ahsan Mahnati said stocks hit new highs in an early-hours rally on the PSX as investors braced for an expected big State Bank of Pakistan (SBP) cut after a sharp cut in government T-bill yields. What was the speculation about the rate cut? 70 bps
Mehnati added that the easing of political noise and the strengthening of the rupee played a catalytic role in a new record in the PSX.
Political noise is a major factor affecting PSX. Stocks retreated two days ago due to political instability, with the market falling more than 3,500 points after PTI’s march on Islamabad turned violent.
However, they bounced back to gain more than 4,600 points to close at 99,269.25 on Wednesday, shortly after the party ended its protests following a government crackdown on protesters.
‘Resilience Amidst Uncertainty’
Mohammad Sohail, CEO of Topline Securities, reflected on the PSX’s resilience, saying: “Seventeen months ago, when Pakistan was being called a banana republic on the brink of default, the market delivered 150% returns.
This is an unprecedented example in the history of Pakistan and global capital markets where a country on the brink of default has recovered so strongly.”
He added that Pakistan’s stock market has consistently given annual returns of 20 percent over the past 25 years, highlighting its potential for sustainable growth.
The driving factors behind the rally
Arif Habib, a leading market analyst, attributed the rise to economic improvement, saying: “Lower interest rates, rising exports, and rising foreign exchange reserves have boosted stock market confidence.”
He acknowledged the continuing challenge of political instability but emphasized its limited impact: “Political instability has always existed in Pakistan.”
Habib added that for sustainable development, the government needs to strategize how to increase its revenue.
‘Liquidity is driving the market’
One of the most important factors behind this rally is improved liquidity, as highlighted by Sana Tawfiq, head of research at Arif Habib Limited.
“The liquidity factor stands as the most important market driver. When interest rates were 22 percent, fixed income assets like bonds were the most attractive asset class for investors. However, with rates falling, we now “We are seeing a shift towards equity funds, which has improved market liquidity.”
This turnaround, coupled with foreign inflows and a stable rupee, has boosted investor confidence, enabling the market to hit new highs.