Stocks on Monday blasted off to a new record intraday high above 91,000 points, driven by strong corporate results and hopes of a reduction of up to 200 basis points (bps) in the central bank’s policy rate as lower borrowing cost boosts economic expansion.
The Pakistan Stock Exchange’s (PSX) benchmark KSE-100 index surged 1,026 points to 91,020 points at 12:13am, up from the previous close of 89,993.96 points.
Analysts attributed the surge to a host of reasons, as the market was abuzz with conjectures of a major loosening of the monetary policy stance on November 4.
Sana Tawfik, Head of Research at Arif Habib Limited, told Geo.tv that the rise was due to the result season as well as the country’s improved liquidity.
Speaking on the sidelines of the 2024 IMF-World Bank Annual Meetings in Washington DC, State Bank of Pakistan (SBP) Governor Jameel Ahmad said he expected the foreign exchange reserves of the country to reach $13 billion by the end of this fiscal year (FY2025).
According to Ahmad, a strong rise in both exports and worker remittances is the main reason for the current account balance’s improvement.
As of October 11, 2024, the SBP’s foreign exchange reserves had grown from a low of $3.1 billion at the end of January 2023 to $11 billion thanks to the low current account and better financial inflows.
Arif Habib Corp’s Ahsan Mehanti said that there were very strong vibes that the SBP would go hawkish on the policy rate in its upcoming meeting, while the government deliberations on privatisation of loss-making state-owned enterprises boosted investors’ morale.
Speculations have been doing rounds of a policy rate cut of up to 400bps by December, as according to analysts the room for easing exists, which has also rekindled foreign investors’ interest in the country’s capital market.
In its previous meeting, the SBP’s Monetary Policy Committee (MPC) announced its most significant rate cut since April 2020, slashing the key policy rate by 200bps to 17.5% due to moderating inflation and falling international oil prices.
If reduced then it would mark the fourth consecutive rate cut since the SBP began reversing interest rates in June 2024, signalling a notable improvement in the country’s macroeconomic outlook and a shift in the central bank’s monetary policy stance.
Inflation dropped to 6.9% year-on-year in September 2024, the lowest since January 2021, down from 9.6% in August, driven by the high base effect, easing commodity and energy markets, and a stable currency, according to the Pakistan Bureau of Statistics (PBS).
This is a developing story and is being updated with more details.
