PSX jumps to new record on rate cut hopes

The Pakistan Stock Exchange (PSX) sustained its upward trend on Wednesday, as investor optimism grew on solid expectations of a rate cut.

The benchmark KSE-100 index surged by 736.10 points, or 0.81%, reaching a new intra-day high of 91,600.19, rising from its previous close of 90,864.09 points.

Pakistan-Kuwait Head of Research Samiullah Tariq told Thenews.com.pk that bullish sentiment is driving the market, supported by positive factors such as falling yields due to expectations of rate cuts, limited investment options due to taxation, and strong corporate earnings.

The State Bank of Pakistan's (SBCP) Monetary Policy Committee (MPC) will meet on November 4 and experts are expecting a 200-bps cut to a 15.5 % policy rate.

Saad Ali, Intermarket Securities Director of Research, told Thenews.com.pk that the current rally in the KSE-100 index is fuelled by a perceived reduction in political uncertainty, which is expected to allow the government to focus on IMF-led reforms.

"Additionally, the market is benefiting from strong liquidity driven by declining interest rates and underperformance in alternative asset classes, particularly real estate.

The ongoing earnings season and stable global oil prices are also providing support to sustain the market’s upward momentum," he added.

In its last session, the SBP's MPC enacted its largest rate cut since April 2020, lowering the key policy rate by 200bps to 17.5%, driven by easing inflation and declining global oil prices.

The central bank had previously slashed rates by 350bps in July and September 2024, totaling a 450bps reduction since June 2024.

If another cut is made, it will mark the fourth consecutive rate reduction since the SBP began reversing rates in June 2024, reflecting an improved macroeconomic landscape and a shift in the central bank’s monetary stance.

Market speculation suggests a potential policy rate cut of up to 400bps by December, as analysts point to ample room for easing, which has also reignited foreign investors’ interest in Pakistan’s capital market.

According to the Pakistan Bureau of Statistics (PBS), inflation dropped to 6.9% year-on-year in September 2024, the lowest since January 2021, down from 9.6% in August, due to the high base effect, stabilising commodity and energy markets, and a steady currency.

This is a developing story and is being updated with more details.