Stock Market
The Pakistani stock market made a strong recovery on Wednesday, rebounding from a significant drop in the previous session that saw the KSE-100 Index lose over 1,000 points.
This recovery was fueled by renewed investor optimism, largely driven by positive macroeconomic indicators and growing expectations of an interest rate cut by the State Bank of Pakistan (SBP).
The rally in the market reflected a shift in sentiment, as investors moved away from Tuesday’s volatility and refocused on the broader economic recovery story.
The Pakistan Stock Exchange’s (PSX) benchmark KSE-100 Index surged by 1,277.16 points, or 1.17%, reaching an intraday high of 110,173.81. This recovery was a clear sign of sustained investor interest, underpinned by broader economic stability.
Several factors contributed to the market’s positive performance. The stable rupee, government incentives to promote legal remittance channels, and the emigration of over one million skilled workers in the past three years provided a solid foundation.
Additionally, reforms targeting illicit foreign exchange trading, along with a reduction in global inflation, also helped support growth in the capital market.
Remittance inflows, which reached $14.8 billion in the first five months of FY2025, reflected a 33.6% year-on-year increase, according to the SBP. Specifically, November saw $2.9 billion in inflows, marking a 29.1% year-on-year rise, though slightly lower than October’s figure. These remittance inflows continue to be a key factor driving market confidence.
Macroeconomic improvements have also strengthened market sentiment. Inflation decreased to 4.9% in November, its lowest level since April 2018, which has led analysts to predict that the SBP’s Monetary Policy Committee will likely cut interest rates by 200 basis points during its upcoming meeting on December 16. This follows a cumulative 700bps rate cut since June.
Pakistan’s foreign reserves received a boost following Saudi Arabia’s extension of a $3 billion deposit for another year, as well as trade agreements worth $560 million.
The country also saw a 25-month high in petroleum sales, reaching 1.58 million tons in November. Furthermore, the government’s Rs353 billion Ijarah Sukuk auction injected additional liquidity into the market.
Investors are closely monitoring the government’s fiscal policy measures, particularly its approach to taxing bank profits from investments in government securities.
A seven-member committee led by Deputy Prime Minister Ishaq Dar is currently reviewing the advance-to-deposit ratio (ADR) framework, with recommendations expected by December 31.
These measures are aimed at meeting revenue targets while encouraging private-sector lending, and they could have a significant impact on banking profitability and market sentiment.
Although the market experienced dramatic swings in Tuesday’s session, with the KSE-100 Index peaking at 111,759.58 before profit-taking, geopolitical tensions, and global equity sell-offs caused a sharp decline, analysts remain optimistic about the market’s future.
With strong macroeconomic fundamentals, declining inflation, and robust remittance inflows, the PSX is expected to continue its upward momentum.
As investors turn their attention to the SBP’s monetary policy meeting and the government’s fiscal measures, the PSX is poised to maintain its positive trend, driven by improving liquidity and favorable economic conditions.
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