The Pakistan Stock Exchange (PSX) witnessed a significant surge on Friday, with the benchmark KSE-100 index climbing more than 700 points during intraday trading. As of 12:16 PM, the index stood at 75,609.82 points, reflecting a gain of 731.70 points, or 0.98 per cent, from its previous close of 74,836.30.
Factors driving the market rally
The bullish trend can be attributed to several key factors:
- MSCI Index Rebalancing: Raza Jafri, Chief Executive of EFG Hermes Pakistan, noted that the ongoing semi-annual rebalancing of the Morgan Stanley Capital International (MSCI) Index is a major driver of the upward trajectory. The rebalancing process typically attracts foreign investment, and further foreign buying is anticipated.
- Softer Inflation Expectations: Investors are optimistic about a potentially softer inflation reading, with the announcement expected on Monday. The expectation of lower inflation is contributing to the positive sentiment in the market.
- Rate Cut Speculation: Yousuf M. Farooq, Director of Research at Chase Securities, highlighted that the market rally is also fuelled by expectations of a rate cut in the upcoming Monetary Policy Committee (MPC) meeting. With inflation projected to be around 13.5pc and current interest rates at 22pc, alongside T-Bill rates hovering around 21pc, the anticipation of a rate cut has increased.
- Upcoming Economic Events: Farooq also pointed out that the upcoming budget, the next International Monetary Fund (IMF) programme, and the MPC meeting will be crucial events influencing the market in the coming month.
Market implications
The surge in the KSE-100 index reflects a broader positive sentiment among investors who are optimistic about the economic outlook and the potential for policy changes that could stimulate further growth. The anticipated rate cut, in particular, could ease borrowing costs and stimulate investment, contributing to sustained market gains.
Moving forward
As the PSX continues to react to both domestic economic indicators and global financial trends, investors will closely monitor the forthcoming inflation data, budget announcements, and policy decisions. The outcomes of these events will likely shape the market’s trajectory in the near term.
