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KSE-100 Index Surpasses 116,000 Points Amid Rate Cut Speculation

The Pakistan Stock Exchange (PSX) reached a historic milestone, with the benchmark KSE-100 Index surpassing the 116,000-point mark during early trading. This surge reflects growing investor optimism, driven by expectations of a significant policy rate cut by the State Bank of Pakistan (SBP).

The KSE-100 Index rose by 2,359.65 points (2.06%), hitting an intraday high of 116,661.45, building on last week’s record-breaking performance. Improving macroeconomic indicators, including robust remittance inflows, stable foreign reserves, and declining inflation, have fueled confidence in Pakistan’s economic recovery.

“Investors are bullish, with gains across the board, as they anticipate a major rate cut by the SBP amid easing inflation,” said Ahsan Mehanti, CEO of Arif Habib Commodities. He attributed the rally to declining bond yields, positive trade balances, rising remittances, and stable foreign reserves.

The Monetary Policy Committee (MPC) announcement, expected later today, has heightened anticipation of a rate cut between 200 and 500 basis points. Businesses advocate for an aggressive cut to stimulate growth, while analysts predict a more measured reduction.

November’s inflation rate dropped to 4.9%, providing room for monetary easing with a real interest rate of 10%. Additionally, revisions to National Savings Schemes (NSS) profit rates, including a 250 basis point cut for savings accounts, are encouraging a shift from savings instruments to equities, boosting market activity.

Foreign inflows remain strong, with November remittances rising 29% year-on-year to $2.9 billion, stabilizing foreign reserves at $16.6 billion as of December 6. SBP reserves climbed to $12.051 billion, the highest since March 2022.

The Current Account Deficit (CAD) shrank by 79% year-on-year to $217 million in the first two months of FY2025, supported by robust remittances and stable exports. Exports are projected to hit $33 billion by FY2025’s end, while remittances are forecasted to reach $33.5 billion, aided by government incentives and easing global inflation.

Economic activity shows improvement, with passenger car sales increasing 50% year-on-year in November and the banking sector achieving an advance-to-deposit ratio (ADR) of 47.8% in November, up from 44.3% in October.

A recent Treasury Bill (T-bill) auction raised Rs1.256 trillion, surpassing the Rs1.2 trillion target. Yield reductions, including a 100 basis point cut on three-month papers, have reinforced expectations of monetary easing.

The PSX’s positive performance is further buoyed by easing political uncertainties and robust fundamentals. With the SBP’s policy announcement imminent, analysts expect the market’s bullish momentum to continue, supported by macroeconomic stability, improved liquidity, and sustained investor confidence.



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