Rate cut optimism propels PSX higher

KSE-100 index advances 365.82 points, settles at 79,017.62

KARACHI:

Pakistan Stock Exchange (PSX) remained bullish on Thursday as investor optimism propelled the KSE-100 index higher by over 350 points, driven by expectations of a further reduction in policy rate by the State Bank of Pakistan (SBP) in the monetary policy announcement later in the day.

The session began with selling pressure, which pushed the index to its intra-day low of 78,577.65 points. However, strong buying interest after midday took the market above 79,200.

Broad-based buying was observed across several sectors including banking, fertiliser, cement, power, oil marketing companies, textile, pharmaceutical, technology and chemicals. Notably, the cement sector attracted significant interest due to hopes for the policy change.

Later, the SBP announced a 200-basis-point (bps) reduction in its policy rate to 17.5%. The rate cut was larger than the anticipation of a 150bps reduction, which came after the closure of the market.

"Stocks closed bullish amid speculation about the SBP policy rate announcement," said Ahsan Mehanti, MD of Arif Habib Corp.

"A strong rupee, falling inflation, upbeat data of remittances and exports, and expectations of the resolution of external financing gap also played the role of catalysts in bullish close at the PSX."

At the end of the session, the KSE-100 index exhibited gains of 365.82 points, or 0.47%, and settled at 79,017.62.

According to a report of Topline Securities, in contrast to Wednesday's trend, Pakistan equities opened on a bullish note ahead of a key monetary policy meeting in the evening.

The KSE-100 sustained the positive momentum throughout the session, closing at 79,018 with an increase of 365.82 points. Broad-based buying was observed in blue-chip stocks, driven by expectations of a 100-150 bps reduction in the rate, thanks to the declining inflation and improved macroeconomic indicators, it said.

Key heavyweights such as United Bank, Fauji Fertiliser, Fauji Cement, Oil and Gas Development Company and Hub Power collectively contributed 236 points to the market's advance.

Investor sentiment remained strong in the cement sector, with heightened expectations about the monetary policy decision, Topline added.

Arif Habib Limited (AHL), in its commentary, wrote that there was an impressive recovery where cement stocks played a leading role in pushing the KSE-100 back above 79,000.

Some 65 shares rose while 31 fell with United Bank (+2.4%), Fauji Fertiliser (+1.24%), and Fauji Cement (+4.78%) being the biggest contributors to the index gains.

The SBP cut its policy rate by 200 bps, exceeding the expected reduction of 150 bps. "This news emerged after the market's closure."

"Given the larger-than-expected cut, a strong gap up towards 80,000 should be anticipated on Friday, where cement stocks will likely continue to lead," AHL added.

Overall trading volumes increased to 584.3 million shares compared to Wednesday's tally of 532.7 million. The value of shares traded stood at Rs16.4 billion.

Shares of 439 companies were traded. Of these, 212 advanced, 167 declined and 60 remained unchanged.

Kohinoor Spinning Mills was the volume leader with trading in 60.7 million shares, losing Rs0.85 to close at Rs8.87. It was followed by WorldCall Telecom with 57.98 million shares, losing Rs0.07 to close at Rs1.43 and TPL Properties with 32.5 million shares, gaining Re1 to close at Rs9.35.

During the trading session, foreign investors bought shares worth Rs195.7 million, according to the NCCPL.