On Monday, the Pakistan Stock Exchange (PSX) saw its benchmark KSE-100 Shares Index soar past the record high of 84,900 points, closing at an all-time high of 84,910.29 points. This surge, amounting to a gain of 1,378.34 points (or 1.65%) from its previous close, was driven by a significant rally in the energy sector and increasing optimism over potential interest rate cuts.
According to a post-market note by brokerage firm Arif Habib Limited (AHL), the stock index began the week with robust gains, with 73 stocks advancing and only 23 declining. Major contributors to the index’s rise included Oil and Gas Development Company (OGDC) (+7.66%), Pakistan Petroleum Limited (PPL) (+6.82%), and Fauji Fertilizer Company (FFC) (+2.53%).
PPL’s announcement that its subsidiary, PPL Asia, had settled with Iraq’s Midland Oil Company and received $6 million (Rs1.665 billion), equivalent to Rs0.61 per share, was highlighted in the AHL report. Additionally, improved collections from gas sales due to timely gas price revisions increased liquidity for both OGDC and PPL. AHL anticipates higher payouts of Rs20/share for OGDC and Rs15/share for PPL, alongside both companies’ capital-intensive projects like offshore drilling.
Samiullah Tariq, Head of Research and Development at Pakistan Kuwait Investment Company, cited the rising expectations of a rate cut as a primary driver, noting the continuous drop in the Consumer Price Index (CPI)-based inflation to single digits, touching 6.9% in September.
Key sectors fueling the gains included automobile assemblers, cement, commercial banks, fertilizers, oil and gas exploration companies, and oil marketing companies (OMCs). Ahsan Mehanti, an analyst at Arif Habib Corp, mentioned that blue-chip oil scrips led stocks to all-time highs amid speculation during the earnings season. Factors like surging global crude oil prices, a slump in banking lending rates, and government deliberations on the privatization of state-owned entities (SOEs) played a catalytic role in the bullish activity.
Heavyweights such as National Bank of Pakistan (NBP), Meezan Bank (MEBL), Fauji Fertilizer Bin Qasim (FFBL), Sui Northern Gas Pipelines (SNGP), and Pakistan State Oil (PSO) also ended in the green zone.
On Friday, the benchmark index had jumped by 810.19 points (0.98%) to 83,531.96 points, hitting an intraday high of 83,605.73 points and a low of 82,594.80 points. JS Research noted that the index had established a higher high and higher low, indicating further upside potential.
Analysts suggest that investor optimism stems from the scope of the State Bank of Pakistan (SBP) extending its ongoing hawkish monetary policy as inflation has steadily declined over the past months. There are expectations of a policy rate cut of up to 400 basis points by December, with speculation that the SBP might revise interest rates downward even before its next scheduled meeting.
CPI-based inflation fell to 6.9% year-on-year in September 2024, the lowest since January 2021, down from 9.6% in August, driven by a high base effect, easing commodity and energy markets, and a stable currency, according to the Pakistan Bureau of Statistics (PBS).
Last month, the SBP’s Monetary Policy Committee cut the key policy rate by 200 basis points to 17.5% from 19.5%, citing a steep fall in both headline and core inflation. Investors also gained confidence from SBP Governor Jameel Ahmed’s statement that Pakistan’s foreign exchange reserves had risen to cover two months of imports, following the receipt of the first tranche from the IMF’s $7 billion Extended Fund Facility (EFF).
