The stock market continued its ascent to cross 106,000 points mark on Thursday, driven by growing anticipation of a substantial interest rate cut in the State Bank of Pakistan’s (SBP) upcoming monetary policy meeting on December 16, record-low inflation and strengthening economic indicators.
The Pakistan Stock Exchange’s (PSX) benchmark KSE-100 Index hit a new intra-day high of 106,123.05, rising by 1,018.72 points, or 0.97%, reflecting sustained investor confidence and optimism in the market’s upward trajectory.
Finance Minister Mohammad Aurangzeb has also reaffirmed the government’s dedication to economic stabilisation through structural reforms and adherence to the International Monetary Fund (IMF) programme.
Speaking at an event in Islamabad, Aurangzeb highlighted that the current account deficit has narrowed, inflation has dropped to a 70-month low, and the country’s economy is showing signs of recovery.
The Ministry of Finance also reported improved financial stability, attributing it to ongoing reforms.
As inflation continues to plummet expectations are rising for further monetary easing, signalling a brighter economic outlook.
The SBP has already slashed interest rates by 700 basis points (bps) across four consecutive meetings since June, bringing the rate to 15%. Experts widely anticipate another significant reduction, with most analysts predicting a cut of at least 200 bps.
A poll conducted by Topline Securities revealed that 71% of respondents expect a minimum reduction of 200 bps, with 63% forecasting exactly 200 bps, 30% expecting 250 bps, and 7% anticipating a larger cut.
The case for monetary easing is supported by November’s Consumer Price Index (CPI) inflation, which clocked in at 4.9%—its lowest in 78 months and well below the SBP’s target range of 5-7%.
“This reading places inflation significantly below the target, leaving substantial room for further rate cuts,” Topline Securities noted.
The decline in inflation is attributed to faster food disinflation and negative electricity price adjustments. Analysts predict inflation will remain in single digits in the coming months, maintaining a favorable environment for monetary easing.
The trade data released by the Pakistan Bureau of Statistics (PBS) has further bolstered market sentiment. Pakistan’s trade deficit narrowed by 7.39% during the first five months (July-November) of the current fiscal year, standing at $8.651 billion compared to $9.341 billion during the same period last year.
Exports rose by 12.57% to $13.69 billion, while imports increased by 3.90% to $22.342 billion. November’s trade deficit narrowed even further, dropping 18.60% year-on-year to $1.589 billion compared to $1.952 billion in November 2023.
Thursday’s rally follows an impressive session on Wednesday, when the KSE-100 Shares Index climbed 545.26 points, or 0.52%, to close at 105,104.33 points after reaching an intra-day high of 105,473.56 points