After a big way rally on Friday, the Pakistan Stock Exchange (PSX) finally rallied and witnessed an intraday jump of over 1,100 points. The index closed up by 1,047.98 points at 89,993.96, which is an increase of 1.18% and signifies optimism about economic stability and growth potential in Pakistan.
Market analysts attribute the bullish momentum to expectations of a policy rate cut by the State Bank of Pakistan (SBP) in its upcoming Monetary Policy Committee (MPC) meeting on November 4. With inflation falling, and generally strong corporate earnings, the market reacts positively as it looks at the balance of prospective benefit from lower interest rates.
The recent behavior of the market has been quite phenomenal, shifting from fears of default to a much stronger economic position,” said Mohammed Sohail, CEO of Topline Securities. “The average price-to-earnings ratio is also still relatively favorable as compared with historical norms.” The stock market has surged nearly 137% in less than two years.
The market had been supported by strong corporate results and improvement in liquidity. According to Research Head at Arif Habib Limited, Sana Tawfik, “Investors are upbeat on the monetary easing due to happen in the coming period and also the corporate performance.”
Lower close for two days came in, as while speaking to AKD Securities Director of Research Awais Ashraf, he quoted, “This is because of expectation of cuts in the policy rate and an improving economic scenario.”.
Analysts widely expect the SBP to cut the policy rate by 200 basis points, considering lower inflation, stable current accounts, and rising remittances. A Topline Securities survey indicates that 85 percent of respondents expect at least a 200 basis point reduction, which is motivated by a sharp fall in inflation that reached 6.9 percent in September.
With inflation under control and economic indicators looking stronger, the PSX is going to see its investors’ confidence joined with policy easing measures.
To Read More: Finance
Salaar Shah