The Pakistan Stock Exchange (PSX) continued its record-breaking performance on Friday, crossing the 109,000-point milestone for the first time, supported by improving macroeconomic fundamentals, including a significant rise in Pakistan’s foreign reserves.
The KSE-100 Index surged by 1,239.12 points, or 1.14%, to reach an intraday high of 109,478.08, marking a remarkable rally that follows a week of rapid growth. Just seven days ago, the PSX had crossed the 100,000 mark, and the momentum has only picked up since then.
Ahsan Mehanti, Managing Director and CEO of Arif Habib Commodities, attributed the market’s bullish trend to strong performances in the oil and banking sectors, driven by speculation ahead of the State Bank of Pakistan’s (SBP) key policy rate announcement next week.
He also highlighted key factors contributing to the rally, including the $3 billion Saudi deposit rollover, the stability of the Pakistani rupee, and upbeat economic indicators, all of which have played a crucial role in setting this new record at the PSX.
According to the State Bank of Pakistan (SBP), Pakistan’s total liquid foreign reserves reached $16.6 billion as of November 29, 2024. This includes $12 billion held by the SBP, which saw an increase of $620 million during the week, partly driven by an official inflow of $500 million from the Asian Development Bank (ADB).
Additionally, the Saudi Fund for Development (SFD) extended the term of a $3 billion deposit, originally maturing on December 5, 2024, by another year. This move followed discussions between Prime Minister Shehbaz Sharif and Saudi Crown Prince Mohammad Bin Salman at the “One Water Summit” in Riyadh.
Sana Tawfik, Head of Research at Arif Habib Limited, pointed out that expectations of a 150-200 basis point rate cut and an influx of liquidity into equities, as funds move out of fixed income, have fueled the continued bullish trend. “With the market’s low multiples, there is room for further upside,” Tawfik added.
Another key factor driving the market’s rise is the country’s inflation rate, which dropped to 4.9% in November, the lowest level since 2017. This marks a sharp decline from last year’s historic high of 38% and is well within the SBP’s target range of 5-7%. Analysts believe this provides the central bank with room for further monetary easing, with many expecting a 200 basis point rate cut in the SBP’s upcoming December 16 meeting. If realized, this would bring the total reduction to 900 basis points since June 2024.
As the PSX edges closer to 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 market is well-positioned for sustained momentum as 2024 draws to a close.
