PSX breaks new record, surges past ‘114,000 points’ amid economic optimism
The Pakistan Stock Exchange (PSX) made history on Thursday, with the KSE-100 Index surpassing the 114,000-point mark for the first time. The index soared by 3,370.29 points (3.04%) to close at 114,180.5 points, reaching an intraday high of 114,408.62, fueled by investor confidence and improving economic indicators.
The rally was driven by positive macroeconomic trends, including expectations of monetary easing, declining inflation, and robust foreign exchange reserves. “Liquidity is a very important factor for the stock market. With successive rate cuts, investors have shifted from bonds to equities,” said Sana Tawfik, Head of Research at Arif Habib Limited.
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Pakistan’s Current Account Deficit (CAD) recorded a 79% year-on-year decline, narrowing to $217 million in the first two months of FY2025, with August showing a $29 million surplus. Strong remittance inflows and stable export earnings supported this improvement.
Exports are projected to reach $33 billion by FY2025, supported by increased domestic production, exchange rate stability, and strong growth in major trading partner economies. Service exports, particularly in IT, are also expected to grow from $3.2 billion in FY2024 to $4.2 billion in FY2025.
Remittances are forecasted to rise to $33.5 billion, aided by government initiatives such as transaction rebates and incentives for using formal banking channels. The government has allocated Rs80 billion for these efforts.
The government’s recent reduction in Treasury Bill (T-bill) yields by up to 100 basis points has further fueled optimism. The auction raised Rs1.256 trillion against a target of Rs1.2 trillion, with the largest yield cut of 100 basis points for three-month papers. Analysts predict the State Bank of Pakistan (SBP) may cut the policy rate by up to 200 basis points at its December 16 meeting, as inflation dropped to a six-year low of 4.9% in November.
The banking sector’s Advance-to-Deposit Ratio (ADR) improved to 47.8% in November, edging closer to the mandatory 50% threshold. Meanwhile, the government revised profit rates on National Savings Schemes (NSS), reducing the Savings Account rate by 250 basis points to 13.5%. These changes are expected to channel more funds into equities, driving further market activity.
Robust economic activity was evident in a 62% year-on-year increase in passenger car sales in November and a 50% rise during the first five months of FY2025. Additionally, the Asian Development Bank (ADB) approved $530 million in loans to modernize Pakistan’s power distribution infrastructure and enhance social protection programs.
Saudi Arabia’s extension of a $3 billion deposit and trade agreements worth $560 million further bolstered foreign reserves and investor sentiment, signaling confidence in Pakistan’s economic recovery.
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