The Pakistan Stock Exchange (PSX) reached an unprecedented milestone, breaching the 56,000-point mark and setting a new all-time high on Monday. The PSX benchmark KSE-100 index soared to 56,238 points in early trading, marking a 1.5% increase or around 850 points from Friday’s closing.
The bullish trend is attributed to positive sentiments following a smooth International Monetary Fund (IMF) review of Pakistan’s economy under its ongoing $3 billion loan program. Investors are buoyed by the anticipation of IMF approval for the next tranche of $710 million, as Pakistan has diligently met all the fund’s conditions during the review.
Moreover, market analysts speculate that the central bank may expedite a benchmark policy rate cut, potentially in December 2023. The expectation arises after the rate of return on government debt securities witnessed a sharp decline of up to 180 basis points last week. A policy rate reduction could provide relief to the economy and businesses by facilitating bank financing at a lower interest rate, stimulating new investment projects.
Amidst this economic boom, listed companies are already reporting record-high profits on the PSX, further fueling investor optimism. The market is also bracing for renewed foreign buying in local stocks ahead of MSCI’s semi-annual review of global stocks scheduled for Tuesday. There is an expectation that PSX will gain weight in the review compared to peer countries, potentially encouraging increased foreign investment.
However, as the stock market soared, the Pakistani rupee experienced a dip, reaching a six-week low of Rs288 against the US dollar in the inter-bank market. The decline is attributed to heightened demand for the greenback. The local currency has maintained a downward trend for the fifteenth consecutive working day, losing another Rs0.77 on Monday, bringing the cumulative loss to nearly 4% or Rs11 over the past 15 days.
The contrasting trends in the stock market and the currency exchange highlight the dynamic economic landscape in Pakistan, with investors closely monitoring developments and anticipating further market movements.
