The stock market extended its record-breaking run on Friday, soaring past the 109,000-point milestone.
The rally was driven by robust macroeconomic fundamentals, including a surge in Pakistan’s foreign reserves, a sharp decline in inflation, strong market liquidity, and growing optimism ahead of the upcoming monetary policy adjustments.
The Pakistan Stock Exchange’s (PSX) benchmark KSE-100 Shares Index surged 1,239.12 points, or 1.14%, to hit an intraday high of 109,478.08, building on Thursday’s historic rally that saw the index cross 108,000 for the first time.
This remarkable rally reflects a week of rapid growth for the PSX, which crossed the 100,000 mark just seven days ago.
Ahsan Mehanti, Managing Director and CEO of Arif Habib Commodities, said: “The market’s bullish trend is led by selected scrips in the oil and banking sectors, driven by speculations ahead of the SBP’s key policy rate announcement next week.”
“The $3 billion Saudi deposit rollover, rupee stability, and upbeat economic indicators have played a catalytic role in this new record at PSX,” he added.
Pakistan’s total liquid foreign reserves reached $16.6 billion as of November 29, 2024, according to the State Bank of Pakistan (SBP).
These reserves include $12 billion held by the SBP, 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 term for a $3 billion deposit maturing on December 5, 2024, by another year.
This extension followed a meeting between Prime Minister Shehbaz Sharif and Saudi Crown Prince Mohammad Bin Salman during the “One Water Summit” in Riyadh.
“Expectations of a 150-200 basis point rate cut and increased liquidity flowing into equities as funds move out of fixed income are the reasons for the continuing bullish trend,” said Sana Tawfik, Head of Research at Arif Habib Limited. “Additionally, the market’s low multiples leave room for further upside.”
Meanwhile, another reason for the market’s rise is the inflation rate, which dropped to 4.9% in November, its lowest level since 2017, providing room for further monetary easing. This marks a sharp decline from last year’s historic high of 38% and is well below the SBP’s target range of 5-7%.
Analysts widely expect the SBP to cut interest rates by at least 200 basis points in its December 16 meeting, which would bring the total reduction to 900 bps since June.
As the PSX approaches the 110,000-point mark, market analysts remain optimistic about continued growth.
With robust macroeconomic indicators, rising reserves, and the likelihood of a significant rate cut, the capital market is positioned for sustained momentum heading into the final weeks of 2024.
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