PSX soars to record high on rate cut hopes

The Pakistan Stock Exchange (PSX) continued its upward journey on Monday as KSE-100 index rose by 1,056 points, reaching an all-time high of 91,916 points.

The KSE-100 index climbed 1,056.57 points or 1.15% to reach 91,916.42 points as of 12:40 pm. This notable increase follows the previous day's closing figure of 90,859.85 points.

Earlier, the market opened with an impressive leap of 1,156.70 points, pushing the index to 92,016.55 during intra-day trading.

Today's trading volume reached an impressive 115,948,437 shares, with a total value of approximately Rs9.95 billion.

The State Bank of Pakistan's Monetary Policy Committee (MPC) is meeting today to discuss interest rates, and stakeholders are eagerly awaiting the decision.

Analysts predict a significant 200 basis points cut in the policy rate, marking the fourth consecutive reduction since June, driven by declining inflation, low current account deficit, and increased remittances.

Stocks experienced a significant rally on Friday, fueled by mild inflation data for October, which bolstered expectations that the central bank will maintain its hawkish monetary policy in the upcoming meeting on November 4.

This anticipated move could lead to lower borrowing costs and stimulate economic growth.

The benchmark KSE-100 Shares Index of the Pakistan Stock Exchange (PSX) surged by an impressive 1,893.09 points, closing at 90,859.85 after reaching a peak of 91,133.28 points during a late rally.

This marked a sharp increase from Thursday's closing level of 88,966.76 points.

Ahsan Mehanti from Arif Habib Corp noted that the market showed a strong recovery, driven by positive data indicating a consumer price index (CPI) inflation rate of 7.2% in October.

This figure, along with the International Monetary Fund's (IMF) revised inflation projection of 9.5% for fiscal year 2025, contributed to the bullish sentiment.

"Speculation about a potential policy rate cut next week and an increase in central bank reserves to $11.2 billion ignited record activity at the PSX," Mehanti commented.

Pakistan’s foreign exchange reserves with the central bank rose by $116 million, reaching $11.156 billion for the week ending October 25.

Total reserves increased by $32 million to $16.049 billion, although commercial bank reserves fell by $83 million to $4.893 billion.

The improvement in reserves followed a current account surplus of $119 million in September, marking the second consecutive monthly surplus after a $29 million surplus in August, compared to a $218 million deficit in September 2023.

The foreign exchange reserves were also bolstered by the first tranche of $1.03 billion from the IMF under the $7 billion Extended Fund Facility (EFF) program.

Pakistan's annual inflation rate rose to 7.2% in October 2024, up from 6.9% in September, but significantly lower than the 26.8% recorded in October 2023, according to data from the Pakistan Bureau of Statistics (PBS).

This reading supports a trend of easing inflation, which peaked at a historic high of 38% last year and was recorded at 26.8% in October 2023.

The latest CPI inflation figures exceeded both market and government forecasts of 6.8%, bringing the average inflation rate for the first four months of FY2025 to 8.7%, down from 28.5% in the same period of FY2024.

Financial market participants expect the State Bank of Pakistan to lower its policy rate by up to 200 basis points in the upcoming November 4 meeting.

If implemented, this would represent the fourth consecutive rate cut since June, influenced by decreasing inflation, a narrowing current account deficit, and rising remittances from overseas workers.