On Monday, the stock market hit an impressive new intraday high, surpassing 91,000 points. This surge was fueled by strong corporate earnings and optimism around potential cuts of up to 200 basis points (bps) in the central bank’s policy rate, which would lower borrowing costs and encourage economic growth.
The benchmark index of the Pakistan Stock Exchange (PSX) jumped 1,026 points to reach 91,020 points by 12:13 PM, rising from the previous close of 89,993.96 points.
Investors are buzzing with speculation about a significant easing of monetary policy set for November 4, with strong earnings reports also driving investment in sectors like automotive, cement, banking, oil and gas, and power generation.
Sana Tawfik, Head of Research at Arif Habib Limited, noted that the current market rally is largely thanks to the earnings season and improved liquidity in the country.
While attending the 2024 IMF-World Bank Annual Meetings in Washington, State Bank of Pakistan (SBP) Governor Jameel Ahmad projected that the nation’s foreign exchange reserves could reach $13 billion by the fiscal year’s end. He cited increased exports and worker remittances as key factors in enhancing the country’s current account balance.
Finance Minister Muhammad Aurangzeb, leading Pakistan’s delegation at the meetings, confirmed that foreign reserves have risen to $11 billion, pointing out the nation’s decreasing dependency on foreign loans and the readiness of local banks to support government initiatives.
As of October 11, 2024, the SBP’s reserves have climbed from a concerning low of $3.1 billion at the end of January 2023 to $11 billion, aided by a lower current account deficit and improved financial inflows.
Analysts believe that the SBP may adopt a more aggressive approach regarding the policy rate in its upcoming meeting, and discussions about privatizing underperforming state-owned enterprises have further boosted investor confidence.
There’s speculation that rates could be cut by as much as 400 bps by December, owing to a favorable environment for easing policies, which has rekindled interest from foreign investors in the local capital market.
In its last meeting, the SBP’s Monetary Policy Committee delivered its largest rate cut since April 2020, reducing the key policy rate by 200 bps to 17.5% due to declining inflation and lower international oil prices.
If further reductions occur, it would mark the fourth consecutive rate cut since the SBP began adjusting rates downwards in June 2024, signaling a notable improvement in the country’s macroeconomic outlook.
Inflation fell to 6.9% year-on-year in September 2024, the lowest level since January 2021, down from 9.6% in August, driven by favorable comparisons from last year’s figures, easing commodity and energy prices, and a stable currency, according to the Pakistan Bureau of Statistics (PBS).
