PTBP Web Desk
The Pakistan Stock Exchange (PSX) experienced a significant rally on Monday, with the benchmark KSE-100 Index surging by over 3,100 points during early trading hours. By 12 PM, the index was recorded at 112,673.18 points, reflecting an impressive increase of 3,160.04 points or 2.89%.
Investor confidence was evident as buying was observed across major sectors, including automobile assemblers, cement, chemicals, commercial banks, fertilizers, oil and gas exploration companies, oil marketing companies (OMCs), and power generation. Index-heavy stocks such as HUBCO, SSGC, SNGP, MARI, OGDC, PPL, HBL, MCB, MEBL, and UBL traded positively, contributing significantly to the market’s upward trajectory.
The positive momentum came on the back of favorable developments, including the central bank’s decision to reduce the policy rate by 200 basis points (bps). This reduction brought the policy rate down to 13%, marking a cumulative decrease of 900bps from its recent peak. This decision was in line with market expectations and served as a key driver for the stock market’s performance.
The KSE-100 Index has been a top-performing asset class in 2024, offering an impressive gain of 75% from January 1, 2024, to December 20, 2024. According to a research report by Topline Securities, this gain includes dividends distributed during the period, further enhancing the overall returns for investors.
However, the performance of the PSX last week painted a starkly different picture. The benchmark index faced severe pressure due to heavy selling by mutual funds and year-end profit-taking by institutional investors. As a result, the KSE-100 Index dropped by 4,788.65 points weekly, closing at 109,513.15 points.
The PSX rally also aligned with a broader recovery in Asian markets. On Monday, Asian shares saw gains following a favorable U.S. inflation reading that raised hopes for potential policy easing in the upcoming year. The benign inflation data provided relief for global markets and eased fears of further aggressive rate hikes by the U.S. Federal Reserve.
The MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.3%, driven by the positive sentiment. The global market’s reaction to inflation data also influenced commodities and gold, as the dollar remained supported by the strong U.S. economy and higher bond yields.
Despite the optimism, emerging markets like Pakistan continue to face challenges. The strengthening dollar and higher U.S. bond yields are exerting pressure on emerging market currencies. Governments in these countries are intervening to stabilize their currencies, aiming to prevent excessive depreciation and control domestic inflation.
Several factors contributed to the renewed buying momentum at the PSX:
- Policy Rate Cut: The State Bank of Pakistan’s decision to cut the policy rate by 200bps played a central role in boosting market confidence. Lower interest rates typically make equities more attractive compared to fixed-income investments.
- Sectoral Gains: Across-the-board buying in major sectors, including banking, oil and gas, and power, drove the index upward.
- Global Sentiment: Positive developments in global markets, particularly in Asia, added to the bullish sentiment at the PSX.
The latest rally at the PSX underscores the resilience of Pakistan’s equity market despite recent headwinds. With the central bank adopting an accommodative stance and global markets showing signs of recovery, the outlook for equities remains optimistic.
Investors should, however, remain cautious of external risks such as global economic uncertainty and domestic currency fluctuations, which could influence future market trends.
