The Pakistan Stock Exchange (PSX) witnessed a robust performance on Thursday, with the benchmark KSE-100 index soaring by 1,440.81 points, marking a 1.79 per cent increase. By 11:13 AM, the index stood at 81,902.14 points, a significant jump from the previous day’s close of 80,461.33 points.
Factors driving the rally
Several factors contributed to the bullish momentum. Mohammed Sohail, CEO of Topline Securities, attributed the surge to slower-than-expected selling pressures related to FTSE rebalancing. This allowed local investors to capitalise on the situation and accumulate shares. Sohail also noted that declining bond yields played a role in shifting investment focus towards equities, providing further support to the stock market.
Sana Tawfik, head of research at Arif Habib Limited, pointed out multiple reasons behind the market’s upward trajectory. One key factor was the decision by the US Federal Reserve to cut interest rates by half a percentage point. This policy shift has positively impacted Asian markets, including Pakistan’s, as it signals a looser monetary environment and reduced borrowing costs.
On the domestic front, Tawfik highlighted positive macroeconomic developments such as Pakistan’s current account recording a surplus for the first time in four months. Additionally, anticipation surrounding the upcoming IMF meeting next week, where a $7 billion loan for Pakistan is expected to be approved, further fuelled optimism in the market.
Market sentiment boosted by Fed rate cut and IMF deal hopes
Yousuf M. Farooq, director of research at Chase Securities, echoed similar sentiments, noting that the US Federal Reserve’s rate cut had created positive spillover effects in local markets, with expectations of Pakistan’s interest rates following suit. He also pointed to the improved current account balance and the likelihood of an IMF deal as contributing factors. Farooq added that inflation numbers for September were expected to come in below 8pc, further supporting the bullish outlook.
Previous gains and policy shifts
This rally follows a strong performance in the previous trading session, where the index gained over 900 points. Analysts linked the gains to improving economic indicators, particularly “positive news” related to the IMF board’s meeting on September 25, which is expected to result in approval of the $7 billion loan facility for Pakistan.
Another significant development was the decision by the State Bank of Pakistan (SBP) on September 12 to cut its key policy rate by 200 basis points, bringing it down from 19.5pc to 17.5pc. The central bank’s rate cut came in response to growing demands for monetary easing, with the aim of spurring economic activity and reducing borrowing costs for businesses.
Conclusion
The PSX continues to ride a wave of optimism driven by favourable international and domestic developments. Falling bond yields, the US Federal Reserve’s rate cut, and Pakistan’s improving macroeconomic indicators have collectively boosted investor confidence. As the market looks ahead to the IMF meeting and further monetary easing, the bullish sentiment is likely to persist, encouraging further investment in equities.