The Pakistan Stock Exchange (PSX) saw a strong rally on Friday, with the benchmark KSE-100 index surging by 868.08 points, or 1.1 per cent, to close at 79,857.77. This increase followed the State Bank of Pakistan’s (SBP) decision to cut its key policy rate by 200 basis points, a move that exceeded market expectations and fuelled optimism among investors.
On Thursday, the SBP reduced its policy rate from 19.5pc to 17.5pc, responding to mounting demands for monetary easing. The market reacted positively, with investor sentiment further buoyed by news that the International Monetary Fund (IMF) would hold a board meeting on September 25 to review Pakistan’s $7 billion Extended Fund Facility (EFF).
Awais Ashraf, Director of Research at AKD Securities, highlighted the market’s enthusiasm in response to both the rate cut and Pakistan’s efforts to meet the IMF’s requirements. “Investors are optimistic about unlocking the EFF and are reassured by the SBP’s aggressive policy stance,” he noted.
Similarly, Yousuf M. Farooq, Director of Research at Chase Securities, commented, “The 200 basis points cut was larger than anticipated, and with the IMF board meeting confirmed, the market anticipates further easing in the next monetary policy statement.” However, he warned that foreign selling tied to FTSE rebalancing could temper the rally’s impact in the short term.
Shahab Farooq, Director of Research at Next Capital Limited, attributed the surge to reduced uncertainty. “The higher-than-expected rate cut, coupled with the announcement of the IMF review, has alleviated concerns. Further stability is expected, especially with the finance minister and SBP governor’s positive remarks on the external account and inflation trends,” he said.
Despite the optimism, analysts remain cautious about fiscal risks, with concerns over a potential mini-budget despite the SBP’s significant profits. Investors will continue to watch economic developments closely as they navigate the opportunities and challenges in Pakistan’s financial markets.