The Pakistan Stock Exchange (PSX) experienced a historic trading session on Friday, with the KSE-100 Index surpassing the unprecedented 115,000-point level during early trading, only to retreat later as investors opted for profit-taking.
The benchmark index climbed to an intraday high of 115,172.44, gaining 991.94 points or 0.87%, driven by strong investor optimism. However, the index fell to an intraday low of 112,946.48, shedding 1,234.02 points or 1.08%.
“Market is consolidating at current levels. Some profit-taking is being observed,” noted Samiullah Tariq, Head of Research at Pak-Kuwait Investment Company. Tariq’s comments reflect a natural pause following record-setting rallies that have pushed the market to historic highs.
The trading activity at the start of the session underscored confidence in Pakistan’s improving macroeconomic fundamentals, supported by declining inflation, expectations of monetary easing, and robust economic activity. However, the pullback highlights a phase of consolidation as traders locked in recent gains.
Economic Indicators Support Market Sentiment
Despite Friday’s profit-taking, analysts remain optimistic about the market’s long-term trajectory. Declining inflation, improving liquidity, and structural economic reforms are expected to sustain growth in the coming weeks.
Foreign reserves stood stable at $16.6 billion as of December 6, 2024, with the State Bank of Pakistan (SBP) holding $12.051 billion—the highest since March 2022. The Current Account Deficit (CAD) narrowed by 79% year-on-year to $217 million during the first two months of FY2025, with August recording a surplus of $29 million.
Exports and remittances are projected to hit $33 billion and $33.5 billion respectively by FY2025, supported by government incentives and reduced global inflation. These positive trends, coupled with a sharp 100 basis point cut in Treasury Bill (T-bill) yields earlier this week, have further bolstered market confidence.
Expected Monetary Easing
Market sentiment has been buoyed by expectations that the SBP will reduce its policy rate by up to 200 basis points at the December 16 Monetary Policy Committee (MPC) meeting. Inflation dropped to 4.9% in November, its lowest level since April 2018, providing room for significant monetary easing.
Economic activity is accelerating, reflected by a 62% year-on-year surge in passenger car sales in November and a 50% increase during the first five months of FY2025. The Asian Development Bank (ADB) has also approved $530 million in loans to modernize Pakistan’s power distribution network and expand social protection initiatives. Thursday’s session saw the KSE-100 Index gain 3,370.29 points or 3.04%, closing at 114,180.50 and marking the third-largest single-day point-wise rally in PSX history. The session reflected robust investor confidence, with the index touching an intraday high of 114,408.62.
Additionally, Saudi Arabia’s extension of a $3 billion deposit and trade agreements worth $560 million have strengthened Pakistan’s foreign reserves and bolstered market sentiment. The banking sector has also shown improvement, with the Advance-to-Deposit Ratio (ADR) reaching 47.8%, nearing the mandatory 50% threshold required by December 31.
With a stable macroeconomic environment, declining inflation, and anticipated monetary easing, analysts expect the PSX to maintain its upward trajectory. While profit-taking may cause periodic pullbacks, the market’s long-term growth prospects remain strong, underpinned by improved investor confidence and favorable economic reforms.
