PSX Hits All-Time High as KSE-100 Surges

The Pakistan Stock Exchange (PSX) has soared to new heights, with the KSE-100 Index reaching a record high of 91,916 points. This remarkable increase reflects optimism in the market, largely driven by expectations that the State Bank of Pakistan (SBP) will announce a significant rate cut soon.

KSE-100 Index Climbs to All-Time High

On Monday, the KSE-100 Index surged by 1,056 points, or 1.15%, reaching 91,916.42 points by midday. This came after an impressive market opening that saw the index jump by 1,156 points to an intra-day high of 92,016.55 points. The trading volume was equally robust, with around 115 million shares exchanged, totaling approximately Rs9.95 billion.

Anticipation Builds as SBP’s Monetary Policy Committee Meets

Investors are keenly awaiting the SBP’s Monetary Policy Committee (MPC) meeting, where a substantial rate cut is anticipated. Analysts forecast a 200 basis points cut, marking the fourth consecutive reduction since June. This trend is fueled by a series of economic indicators: falling inflation, a declining current account deficit, and rising remittances from overseas workers. If confirmed, this rate cut would be a significant move to boost economic activity by reducing borrowing costs.

Market Rally Driven by Optimistic Inflation Data

The stock market’s upward momentum began on Friday, with the KSE-100 Index surging by nearly 1,900 points to close at 90,859.85. This rally was ignited by a lower-than-expected inflation rate for October, which eased investor concerns and fueled optimism for an extended period of monetary easing by the central bank.

Ahsan Mehanti, an analyst from Arif Habib Corp, noted, “Positive data on consumer price index (CPI) inflation at 7.2% in October and the IMF’s revised inflation projection of 9.5% for FY2025 has bolstered investor confidence in the market.” These factors, coupled with speculation around a rate cut, have led to record-breaking activity at the PSX.

Foreign Reserves and Current Account Trends Boost Confidence

The SBP’s foreign exchange reserves increased by $116 million last week, reaching $11.156 billion. Total reserves now stand at $16.049 billion, following two consecutive monthly current account surpluses in August and September. This increase in reserves, further boosted by the first tranche of $1.03 billion from the IMF’s Extended Fund Facility, has also added to the market’s positive sentiment.

Lowering Inflation and Expected Rate Cut to Benefit Market

Inflation in Pakistan was reported at 7.2% in October, slightly higher than September’s 6.9% but far below the 26.8% recorded in October 2023. This figure supports a broader trend of easing inflation, which reached a record 38% last year. The CPI reading exceeded expectations of 6.8%, bringing the average inflation rate for FY2025’s first four months to 8.7%, down from 28.5% for the same period last year.

Given this backdrop, financial market experts are betting on a policy rate cut of up to 200 basis points during the SBP’s November 4 meeting. Such a move could stimulate economic growth by making borrowing more affordable, benefiting businesses and investors alike.

Outlook for Pakistan’s Stock Market and Economy

As inflation continues to decline and reserves grow, Pakistan’s economy shows signs of gradual recovery. With the anticipated rate cut, businesses are likely to benefit from lower financing costs, leading to increased economic activity. The stock market’s recent performance reflects a bullish outlook for Pakistan’s financial sector, highlighting investor optimism about the future.