PTBP Web Desk
The Pakistan Stock Exchange (PSX) experienced a significant surge on Thursday, with the benchmark KSE-100 Index gaining nearly 1,500 points. This rally was fueled by improved macroeconomic indicators on the local front and the Federal Reserve’s unexpected reduction in the policy rate.
The KSE-100 Index was trading at 81,927.44 points, showing an increase of 1,466.11 points, or 1.82%. This impressive performance was primarily driven by buying activity in major sectors such as commercial banks, cement, oil and gas exploration companies, and Oil Marketing Companies (OMCs). Index-heavy stocks like Sui Southern Gas Company (SSGC), Oil and Gas Development Company (OGDC), Pakistan Petroleum Limited (PPL), Pakistan Oilfields Limited (POL), Habib Bank Limited (HBL), MCB Bank, and Meezan Bank Limited (MEBL) were all trading in the green.
Market analysts attribute this bullish trend to several key factors. One of the primary reasons is the Federal Reserve’s recent decision to cut interest rates. The Fed reduced rates by half a percentage point on Wednesday, initiating a steady easing of monetary policy. This rate cut came amid growing concerns about the health of the job market in the United States. The Federal Reserve’s rate-setting committee expressed confidence that inflation is moving towards the 2% target and that the risks to achieving employment and inflation goals are balanced.
Sana Tawfik, Head of Research at Arif Habib Limited (AHL), remarked, “The Federal Reserve rate cut is definitely one of the reasons driving the market.” This move by the US central bank has had a ripple effect, boosting investor confidence in emerging markets like Pakistan.
Apart from the Federal Reserve’s actions, local macroeconomic indicators have also played a crucial role in boosting market sentiment. Pakistan has seen an improvement in its current account, posting a surplus of $75 million in August 2024, compared to a deficit of $152 million in the same month of the previous fiscal year, according to data released by the State Bank of Pakistan (SBP). This positive shift in the current account has bolstered investor optimism.
Furthermore, there is an expectation of a further decline in inflation, which is adding to the positive market sentiment. Lower inflation rates often lead to increased consumer spending and investment, which can have a positive impact on the stock market.
The market’s positive momentum is also linked to developments on the International Monetary Fund (IMF) front. Pakistan is awaiting the approval of the IMF’s Executive Board for a 37-month Extended Fund Facility (EFF) worth about $7 billion. The board meeting is scheduled for September 25, and there is widespread optimism that this will lead to the disbursement of funds, further strengthening Pakistan’s economic position.
“The market was already optimistic, especially due to developments on the IMF front, and is expected to remain so in the coming days as the IMF Executive Board meets to approve funding for Pakistan,” Tawfik added. The IMF’s support is seen as a critical factor in stabilizing Pakistan’s economy and attracting foreign investment.
On the previous day, the KSE-100 Index had already shown signs of this upward trend, closing at 80,461.34 points, up by 970.20 points or 1.22%. The sustained rally in the market indicates strong investor confidence and a positive outlook for the future.
