Pakistan Stock Market Surges as Positive Economic Indicators Boost Investor Confidence
The Pakistan Stock Exchange (PSX) kicked off the week with remarkable momentum on Monday, continuing the rally observed in recent sessions. Fueled by encouraging macroeconomic developments—most notably a consistent decline in inflation—and expectations of robust corporate earnings, investors flocked to value stocks, pushing the market to new highs.
The benchmark KSE-100 Index soared by 1,917.62 points, or 1.89%, to close at an unprecedented 103,274.94 points, compared to its previous close of 101,357.32. This marks a significant milestone in the index’s upward trajectory, reflecting growing optimism in the country’s financial markets.
Key Drivers of Market Growth
The rally was underpinned by improving economic indicators. “The positive momentum we’ve observed since last week continues to be driven by strengthening macroeconomic fundamentals,” said Sana Tawfik, Head of Research at Arif Habib Limited.
She added, “With inflation expected to drop to its lowest level since April 2018—projected at around 4.7%—and enhanced market liquidity, the outlook remains highly favorable for investors.”
A notable development bolstering market sentiment was Pakistan’s receipt of $500 million from the Asian Development Bank (ADB) under the Climate Change and Disaster Resilience Enhancement Program. This injection has pushed foreign exchange reserves close to the $12 billion mark, reducing economic uncertainty and reinforcing investor confidence.
Sectoral Performance and Trading Activity
The market’s performance was buoyed by strong activity across various sectors. Commercial banks led the charge, contributing 1,675 points to last week’s gains. The banking sector further benefited from the removal of the Minimum Deposit Rate (MDR) requirement for corporate deposits, which spurred significant investor interest.
Other sectors, including technology and communication, oil and gas exploration, and real estate, also recorded robust gains, highlighting broader market participation.
Daily traded volumes surged by 70% day-on-day to 1.554 billion shares—the highest since December 18, 2023, when 1.89 billion shares were traded. The average daily traded value on the ready counter also rose by 7.1% week-on-week to Rs36.85 billion, underscoring strong investor activity.
Macroeconomic Reforms and Market Resilience
Market analysts credited the rally to the government’s decisive economic reforms and a brighter inflation outlook. Projections suggest inflation could further decline to 5.6%-6.5% by December, raising hopes of another interest rate cut by the State Bank of Pakistan (SBP).
Samiullah Tariq, Head of Research at Pak-Kuwait Investment Company, noted, “The consistent decline in yields and the shift of investors from fixed income to equities are fueling market growth.”
The SBP’s earlier interest rate cut in November has created a favorable environment for equities, providing an additional boost to investor confidence.
Despite some foreign outflows—$15.1 million in withdrawals by international investors—local insurance companies stepped in with strong buying activity, contributing to the market’s upward momentum.
Weekly and Historical Milestones
Monday’s performance builds on last week’s historic achievement, where the index surpassed the 100,000-point mark for the first time, closing at 101,357.32 on Friday.
The previous week saw the KSE-100 Index climb by 3,559.09 points, supported by enthusiastic local investors and institutional participation. This growth occurred despite intermittent dips, showcasing the market’s resilience amidst political volatility and a favorable regulatory landscape.
Outlook: Optimism Prevails
Analysts remain optimistic about the PSX’s trajectory, citing consistent policy support, stabilized external accounts, and reduced costs of doing business as key factors sustaining the market’s upward momentum.
As Pakistan’s equity markets continue to push into uncharted territory, the combination of improving economic fundamentals and proactive policy measures provides a solid foundation for sustained growth.
“The market’s resilience and optimism reflect the confidence of investors in Pakistan’s economic recovery and the effectiveness of ongoing reforms,” concluded Sana Tawfik.
