Despite ongoing political instability and economic challenges, the Pakistan Stock Exchange (PSX) reached a historic milestone, surpassing the 100,000-point mark on Thursday.
The KSE-100 Index, PSX’s benchmark, rose by 1,077.25 points (1.09%) to hit an intraday high of 100,346.50, with analysts predicting further growth.
This extraordinary achievement is attributed to several factors, with market experts highlighting the government’s commitment to implementing key economic reforms.
The KSE-100 Index’s record performance reflects a 60% year-to-date gain, driven by a combination of 47% capital gains and 13% dividend yield. Key sectors contributing to this growth include commercial banks, fertilizers, and oil and gas exploration, with prominent stocks such as Fauji Fertilizer and United Bank Ltd playing pivotal roles.
Factors Behind the PSX Surge
To understand the driving forces behind this historic milestone, we consulted market analysts.
‘Rating Upgrades’
Economist Khurram Schehzad noted that the government’s fiscal and external account reforms, along with the reduction in the cost of doing business, played a significant role in boosting investor sentiment.
Schehzad, also an adviser to the Finance Minister on economic reforms, pointed out that the drop in business costs was due to lower policy interest rates, currency stability, and the successful completion of the IMF’s SBA, followed by a longer, more extensive IMF programme.
He also credited the recent rating upgrades and Moody’s positive outlook for further supporting the market’s upward movement.
‘Consistency with IMF Programme’
Samiullah Tariq, head of research at Pak-Kuwait Investment Company, emphasized the role of falling yields and reduced inflation expectations in driving the market. He added that the government’s consistent adherence to the IMF programme had been a key factor behind the market’s continued growth.
Tariq also mentioned that increased mutual fund investments in equities were expected to further boost the market.
‘Political Stability and Rupee Strength’
Ahsan Mehnti from Arif Habib Corp attributed the record highs to a rally spurred by investor optimism about a potential State Bank of Pakistan rate cut, following a sharp decline in government T-bill yields. He highlighted the role of reduced political noise and stable rupee in driving investor confidence.
While political instability often impacts the PSX, the market rebounded strongly after a recent dip due to political protests, rising more than 4,600 points following PTI’s decision to end its protest.
‘Resilience Amid Uncertainty’
Muhammad Sohail, CEO of Topline Securities, reflected on the market’s resilience, noting that despite Pakistan’s near-default status 17 months ago, the market had delivered a 150% return. He pointed out that Pakistan’s stock market has consistently offered a 20% annual return over the past 25 years, demonstrating its long-term growth potential.
‘Driving Factors Behind the Rally’
Arif Habib, a leading market expert, attributed the surge to economic improvements, such as lower interest rates, increased exports, and growing foreign exchange reserves, while acknowledging that political turbulence remains a challenge. He stressed the importance of government strategies to increase revenue for sustainable growth.
‘Liquidity Driving the Market’
Sana Tawfik, Head of Research at Arif Habib Limited, identified improved liquidity as a key driver of the market’s recent rally. With declining interest rates, funds previously invested in fixed-income assets like bonds have shifted to equities, boosting market liquidity. This shift, coupled with foreign investments and a stable rupee, has further strengthened investor confidence, propelling the market to new heights.
