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Friday February 28, 2025

PSX closes week on high note, riding earnings, rate cut optimism

Benchmark index gains 1049.32 points, or 0.93%, to close at 114,255.72 points

By Business Desk
January 31, 2025
Brokers monitor an index board showing latest share prices at the Pakistan Stock Exchange in Karachi on January 26, 2023. — AFP
Brokers monitor an index board showing latest share prices at the Pakistan Stock Exchange in Karachi on January 26, 2023. — AFP

The capital market stayed the winning course on Friday as investors are pinning hopes on the index heavyweights to deliver robust corporate earnings, amid expectations that the central bank was poised to lower the policy rate to near single digits soon.

The Pakistan Stock Exchange’s (PSX) benchmark KSE-100 Index gained a solid 1049.32 points, or 0.93%, to close at 114,255.72, after hitting an intraday high of 115,106.99, reflecting sustained investor confidence, while the lowest level of the session was recorded at 113,692.87.

“Stocks were bullish, led by scrips across the board on investor speculations over earning announcements,” said Ahsan Mehanti, Managing Director and CEO of Arif Habib Commodities.

“SBP hints at further rate cuts amid thin inflation, government measures, rupee stability, and falling government bond yields played a catalytic role in the record surge at PSX,” he added.

State Bank of Pakistan (SBP) Governor Jameel Ahmad highlighted that cooling inflation provided "ample room" for further monetary easing, further boosting investor optimism.

In an interview with Bloomberg TV on Tuesday, Ahmad noted that both headline and core inflation were trending downward, allowing the central bank flexibility to cut interest rates further after reducing the policy rate to 12% on Monday.

Pakistan’s inflation, which peaked at 38% in May 2023, has now recorded a single-digit increase in recent months. Analysts anticipate further easing, reinforcing expectations of additional rate cuts in the coming months.

Despite the market’s robust performance, concerns over Pakistan’s foreign exchange reserves persisted. The SBP reported a decline of $76 million in reserves, bringing the total to $11.372 billion in the week ending January 24. The central bank attributed the decline to external debt repayments, which continued to weigh on the country’s financial position.

Total foreign exchange reserves fell by $137 million to $16.052 billion, while reserves held by commercial banks declined by $61 million, settling at $4.68 billion. The drop in reserves highlights ongoing external financing challenges, with financial inflows failing to offset debt servicing obligations.

The strong momentum seen on Friday followed a major rebound in the previous session, where the KSE-100 Index posted a gain of 1,719.04 points (1.54%), closing at 113,206.40 from the prior session’s 111,487.36. The market remained volatile, hitting an intraday high of 113,400.57 while touching a low of 111,805.66.

Looking ahead, analysts anticipate continued volatility as investors closely watch corporate earnings reports and key macroeconomic developments.