PSX stretches record streak as SBP seen staying the course on rates

Stretching the winning streak, stocks scaled new peaks on Tuesday, largely driven by expectations of a significant interest rate cut in the central bank's monetary policy meeting scheduled for the first week of November amid renewed economic optimism.

Pakistan Stock Exchange's (PSX) benchmark KSE-100 shares index gained 668.58 points to hit a record high of 90,864.09 points, after flirting with an intraday high of 91,358.15 points.

Brokerage Topline Securities in its market report said: "This rally highlights the market’s ongoing bullish momentum, fueled by robust corporate earnings that surpassed expectations, strengthening investor confidence."

Institutional buying further propelled the rally, supporting the positive market sentiment, the brokerage report said.

“Trading activity remained strong, with 602 million shares exchanged, amounting to Rs 28 billion, while WorldCall Telecom (WTL) led volumes with 41 million shares traded,” it added.

In a post market note, Ahsan Mehanti, senior analyst at Arif Habib Corp, said the market reached a new all-time high as investors weighed robust financial results and speculated over an imminent policy rate cut by the State Bank of Pakistan (SBP) next week.

"Foreign interest in blue-chip banking and fertilisers, along with institutional buying amid easing lending rates, played a catalytic role in the record bullish activity at the PSX," Mehanti added.

Index-heavy stocks, including Habib Bank Limited (HBL), MCB Bank Limited (MCB), Meezan Bank Limited (MEBL), Pakistan Petroleum Limited (PPL), Pakistan State Oil (PSO), Sui Northern Gas Pipelines Limited (SNGPL), and Sui Southern Gas Company (SSGC), led the rally today.

Commenting on the extended rally, Samiullah Tariq, a senior analyst at Arif Habib Limited, attributed the surge to robust corporate results, improved payouts, falling yields, and expectations of further policy rate cuts in the central bank’s upcoming meeting.

The market is alive with speculation about a significant easing of the monetary policy stance on November 4, while strong corporate earnings are fueling buying interest across sectors like auto, cement, banking, energy, and power generation.

In its previous meeting, the SBP's Monetary Policy Committee (MPC) announced its most significant rate cut since April 2020, decreasing the key policy rate by 200bps to 17.5% due to moderating inflation and falling international oil prices. The central bank slashed the policy rate by 350bps in July and September 2024, resulting in a cumulative reduction of 450bps since June 2024.

If reduced then it would mark the fourth consecutive rate cut since the SBP began reversing interest rates in June 2024, signalling a notable improvement in the country’s macroeconomic outlook and a shift in the central bank’s monetary policy stance.

Speculations of a policy rate cut of up to 400bps by December are doing rounds of the market, as according to analysts the room for easing exists, which has also rekindled foreign investors' interest in the country’s capital market.

Inflation dropped to 6.9% year-on-year in September 2024, the lowest since January 2021, down from 9.6% in August, driven by the high base effect, easing commodity and energy markets, and a stable currency, according to the Pakistan Bureau of Statistics (PBS).