On November 7, 2024, the Pakistan Stock Exchange (PSX) continued its upward trajectory, with the KSE-100 index reaching an impressive 92,498 points, marking an increase of over 400 points from the previous day's close of 92,021. This bullish trend has been attributed to a combination of positive economic indicators and a recent cut in the policy rate by the State Bank of Pakistan, which lowered the rate by 250 basis points to 15% effective November 5. The monetary policy committee noted a faster-than-expected decline in inflation, which approached its medium-term target in October [db82e241].
This surge in the stock market follows a period of significant volatility earlier in the year, particularly in late September 2024, when the KSE-100 Index experienced a sharp decline due to geopolitical tensions in the Middle East. The index had fallen over 700 points in response to the assassination of Hezbollah leader Hassan Nasrallah by Israel, which heightened investor anxiety and led to significant selling pressure in key stocks [1e12b6c5].
Despite the earlier turmoil, the approval of the Extended Fund Facility (EFF) by the International Monetary Fund (IMF) has played a crucial role in reducing uncertainty and improving foreign exchange reserves. The Pakistani government is also set to meet with the IMF for an additional $1 billion in climate financing, further bolstering investor confidence [db82e241].
In the months leading up to this recent surge, the KSE-100 Index had shown signs of recovery following a staff-level agreement between Pakistan and the IMF for a $7 billion EFF program. The Current Account Deficit (CAD) for FY24 was reported at $681 million, down 79% year-on-year, while textile and food exports showed slight increases. The average daily trading volume had increased by 5.6% week-on-week to 463.55 million shares, and the Pakistani Rupee (PKR) appreciated by 0.1% week-on-week to close at 278.13/US$ [e82c9fa8].
Finance Minister Muhammad Aurangzeb emphasized the necessity for fundamental economic reforms to ensure that the latest IMF agreement is the last. The recent cut in the policy rate is expected to stimulate investment and consumer spending, contributing to a more robust economic environment [db82e241].