The Pakistan Stock Exchange (PSX) achieved a remarkable milestone, with the KSE-100 index crossing the unprecedented 109,000 mark. This historic surge reflects optimism fueled by macroeconomic developments, including a notable cut in the policy rate by the State Bank of Pakistan (SBP). The rally is attributed to a combination of stabilizing economic indicators, strategic sectoral performance, and renewed investor confidence.
Key Drivers Behind the Record-Breaking Surge
Policy Rate Cuts and Macroeconomic Stability
The SBP recently announced a 250 basis point reduction in its policy rate, lowering it to 15%. This decisive move is part of an ongoing monetary easing cycle, which has seen cumulative cuts of 700 basis points from a peak of 22%. These measures aim to stimulate economic growth amidst a declining inflation trend, which registered at 7.2% in October.
Additionally, the government has strategically leveraged external financial commitments, such as $3 billion from Qatar and $2.8 billion from Saudi Arabia. These inflows have not only boosted foreign reserves but also created a conducive environment for sustained market growth.
Sectoral Performance: Cement, Fertilizer, and Energy Lead
The cement sector emerged as a key driver, with companies like Lucky Cement and Cherat Cement making substantial contributions to the index’s gains. Similarly, the energy and fertiliser sectors saw heightened investor activity, driven by favorable export data and robust remittance inflows. The addition of eight Pakistani firms to the MSCI Frontier Markets Index further enhanced market liquidity and global investor interest.
Upbeat Economic Indicators
Strong remittance figures, reaching $3.05 billion in October, combined with rupee stability and declining NSS rates, created a positive outlook for the market. The issuance of Ijarah Sukuk worth Rs339 billion and a reduction in yields also attracted significant institutional investments.
Impacts on Market Dynamics
Record Trading Volumes
Trading volumes saw a sharp increase, with 589.5 million shares exchanged, marking a 26% rise compared to previous sessions. The value of shares traded reached Rs29.96 billion, showcasing heightened market activity and confidence.
Sectoral Contributions to Index Gains
Key sectors, including cement, power generation, oil and gas, and automobiles, collectively added over 1,500 points to the KSE-100 index. The bullish momentum indicates strong investor sentiment and a favorable macroeconomic environment.
Foreign and Institutional Investment Trends
While foreign investors recorded net sales worth $4.65 million, domestic institutional buying played a critical role in supporting the market’s upward trajectory. This balance highlights the market’s resilience amid global uncertainties.
Outlook for the Coming Months
Analysts predict continued growth, with sectors like cement, fertiliser, and technology poised for further gains. The SBP’s monetary easing, coupled with strategic government initiatives, is expected to maintain the market’s positive momentum. Investors are advised to adopt a “buy-on-dips” strategy, focusing on high-performing sectors.
Source : The Express Tribune
