stocks hit another record high today, breaking through the barrier of 116,000 on investor optimism ahead of the expected policy set by the State Bank of Pakistan (SBP) late today.
Stable remittance flows, stabilization of foreign reserves and low inflation have boosted confidence in the country’s economic recovery.
The Pakistan Stock Exchange (PSX) KSE-100 index rose 1,867.61 points or 1.63% to close at 116,169.41 after trading at 116,681.59.
Ahsan Mehanti, managing director and CEO, Arif Habib Commodities, said, “The stock is driven by the writing on the board.
“Currently, the yield of government bonds fell to 11.99%, while high economic indicators for trade balance, foreign exchange reserves and remittances hit record highs on PSX,” he said.
The market is still bullish in anticipation of the Monetary Policy Committee (MPC) announcement, with prices expected to be between 200 and 500 points. Businesses favor aggressive cuts to spur growth, while analysts expect more modest adjustments.
The November inflation rate fell to 4.9%, leaving real interest rates at a positive 10% and plenty of room for monetary easing. Investors were encouraged by the government’s revision of National Savings Scheme (NSS) interest rates, which saw a reduction of 250 basis points in savings account returns. This move is expected to boost market activity and shift funds from savings instruments to equities.
Foreign inflows also remain strong. Remittances rose 29% year-on-year to $2.9 billion in November, contributing to stable foreign reserves of $16.6 billion as of December 6, 2024. SBP reserves rose to $12.051 billion, the highest since March 2022.
Meanwhile, the current account deficit (CAD) narrowed significantly to $217 million in the first two months of 2013, supported by strong cash flow and stable export earnings.
Exports are expected to reach $33 billion by the end of 2013, with remittances expected to reach $33.5 billion thanks to government incentives and reduced global inflation. The economic recovery is also evident in car sales, which rose 52% year-on-year in November, reflecting consumer demand.
The banking sector continues to show improvement, with the deposit ratio (ADR) rising to 47.8% in November and 44.3% in October as banks try to break the 50% mandatory threshold.
Last week’s Treasury auction (T-bill) further boosted liquidity, raising $1.256 trillion against a target of $1.2 trillion. The yield drop was the biggest cut of 100 basis points (bps) for a three-month record, falling from 12.99% to 11.99%. The six-month paper fell 89bps to 11.99 percent, while the 12-month paper fell 5s to 12.3 percent. This reform has boosted expectations of monetary relief.
Economic activity is gathering pace with strong investor sentiment and consumer demand. With passenger car sales expected to rise 50% in the first five months of 2025, the Asian Development Bank (ADB) has approved a $530 million loan to modernize Pakistan’s electricity distribution system and expand social protection programs.
The PSX index, which saw the KSE-100 index hit the 114,000-point barrier for the first time last week, eased political uncertainty and solid economic fundamentals. These factors continue to support the upward trajectory of the market.
With the SBP policy announcement expected today, analysts expect the market to maintain its strong momentum.
A significant reduction, coupled with strong macroeconomic stability and enhanced liquidity, will further boost investor confidence and keep the PSX on a positive track in the coming weeks.
