Shares at the Pakistan Stock Exchange (PSX) surged by more than 800 points on Friday following the State Bank of Pakistan’s (SBP) significant interest rate reduction. The benchmark KSE-100 index rose by 868.08 points, or 1.1 percent, reaching 79,857.77 points by 11 a.m. from its previous close.
Awais Ashraf, director of research at AKD Securities, expressed that investor enthusiasm stemmed from Pakistan meeting all IMF prerequisites for a $7 billion Extended Fund Facility and the SBP’s aggressive monetary easing announced the previous day.
The International Monetary Fund (IMF) also confirmed a forthcoming board meeting on September 25 to deliberate on the new EFF, which contributed to positive market sentiments.
Read: IMF to Review Pakistan’s $7 Billion Loan Request on September 25
Moreover, the SBP reduced its key policy rate by 200 basis points to 17.5 per cent from 19.5 per cent, responding to calls for a significant rate cut.
Read: State Bank of Pakistan Cuts Key Policy Rate by 200bps
Mohammed Sohail, CEO of Topline Securities, acknowledged that the IMF board meeting and the rate cut were instrumental in boosting market confidence. However, he noted that potential foreign selling due to FTSE rebalancing tempered the rise in share prices.
Shahab Farooq, research director at Next Capital Limited, attributed the positive market trend to the unexpectedly large policy rate cut and the announcement of the IMF’s executive board review date. He highlighted that delayed IMF negotiations had previously fueled market uncertainties.
Further optimism may arise from recent affirmations by the finance minister and the SBP governor about a stabilizing external account and a downward trend in inflation, which are likely to bolster investor confidence.
However, he warned that fiscal concerns, including the possibility of a mini-budget despite the SBP’s significant profits, still posed a risk to the economic outlook.
