The Pakistan Stock Exchange (PSX) continued its bullish momentum on Friday, with the market surging over 500 points to set a new record. The benchmark KSE-100 index rose by 532.44 points, or 0.57%, reaching 94,724.33 points, up from the previous close of 94,191.89 at 11:11 am. By 12:06 pm, the index had climbed even further, gaining 768.01 points (0.82%), and reached 94,959.90 points. The index ultimately closed at 94,763.64, up 571.75 points from the previous day.
Market experts attributed the rally to a combination of factors, including strong local fund buying following a significant reduction in interest rates. Mohammed Sohail, CEO of Topline Securities, highlighted that the buying spree was driven by “non-stop buying by local funds” after the sharp rate cut. He also pointed to the positive signals from an ongoing visit by International Monetary Fund (IMF) staff, which indicated that Pakistan’s economy was stabilizing.
Awais Ashraf, Director of Research at AKD Securities, noted that a stay order granted to banks on the implementation of the ADR tax had further boosted the KSE-100 index. This, combined with monetary easing and improved cash flows from companies affected by circular debt, helped drive the market upward. He also emphasized that stocks remained attractive due to their low price-to-earnings ratio of 4.2x, particularly as returns on fixed-income instruments and commodities continue to decline.
Yousuf M. Farooq, Director of Research at Chase Securities, also attributed the gains to a shift in investor flows. As returns from fixed-income mutual funds have dwindled, investors are increasingly diverting their cash into equities. He reiterated that macroeconomic indicators were trending toward stability, with key signs such as the halt in circular debt accumulation, rising sales in the automotive sector, and a boost in sales of fast-moving consumer goods (FMCGs).
Farooq also noted that the property market was seeing increased activity, with buyers rushing to make purchases out of fear of missing out. When asked about the nature of this rally compared to previous bull runs, Farooq pointed out that the number of market participants has grown significantly, partly due to the rise in online account openings. He also noted that the proportion of equity mutual funds in total assets under management remains small, suggesting that conversions are taking place.
The sharp and swift decline in interest rates has had a substantial impact on market sentiment. Farooq observed that the rate cuts were more pronounced in this cycle, given that the peak of interest rates was higher than in previous cycles, resulting in an accelerated shift in sentiment.
Earlier in the week, the stock market had crossed the 94,000 mark, setting another all-time high. Topline Securities attributed the rally to growing optimism about the economy, fueled by reports indicating that the IMF had no concerns about Pakistan’s progress in meeting revenue targets. As a result, fears of imminent fiscal measures, such as a mini-budget or new taxes, have eased, further bolstering market confidence.
