PSX advances on positive economic indicators, improved investor sentiment

The capital market rebounded on Wednesday after Tuesday’s pullback, driven by improving macroeconomic indicators and recent policy measures that have bolstered investor confidence.

The benchmark KSE-100 Index surged by 1,376.02 points, or 1.2%, during early trading to reach an intraday high of 116,236.7 points, reflecting renewed optimism among market participants.

Pakistan’s current account posted its largest monthly surplus in nearly a decade, recording a $729 million surplus in November 2024. This marks the fourth consecutive month of surplus and represents the highest monthly figure since February 2015, a significant turnaround from the $148 million deficit in November 2023.

For the first five months of FY2025, the current account surplus stands at $944 million, compared to a deficit of $1.67 billion during the same period last year. The improvement is attributed to a 14% month-on-month reduction in the trade deficit, a 43% decline in the services deficit, and reduced interest and dividend repatriations.

Prime Minister Shehbaz Sharif praised the record current account surplus, calling it “extremely encouraging for the national economy.” He noted that this achievement would strengthen Pakistan’s international economic position and further bolster investor confidence.

Net foreign direct investment (FDI) rose by 31% year-on-year to $1.124 billion during the first five months of FY2025, with November contributing $219 million, a 27% increase from the same period last year. The key contributors to FDI were China, Hong Kong, and the United Kingdom, with notable investments in the power and financial sectors.

Remittance inflows also grew, increasing by 29% year-on-year to $2.9 billion in November and totaling $14.8 billion in the first five months of FY2025. Government incentives promoting formal banking channels and stable foreign exchange reserves, which stand at $16.6 billion (with $12.051 billion held by the SBP), have supported this growth.

The State Bank of Pakistan (SBP) recently reduced the policy rate by 200 basis points, bringing it down to 13%. This aggressive monetary easing is aimed at stimulating economic activity amid falling inflation, which hit 4.9% in November, the lowest level since April 2018.

During a briefing, SBP Governor Jameel Ahmad expressed optimism about achieving sustained economic stability, projecting foreign reserves to exceed $13 billion by the end of FY2025.

Tuesday’s session was marked by volatility, with the KSE-100 Index crossing the 117,000-point mark to hit an intraday high of 117,039.17 before profit-taking dragged it to a low of 113,688.54. The index closed at 114,860.68, down 1,308.73 points (1.13%), as traders booked profits following recent record-breaking sessions.

Despite intermittent volatility, the PSX remains buoyed by strong macroeconomic fundamentals, including easing inflation, robust remittance inflows, and rising FDI.

Analysts expect the market to maintain a positive trajectory, supported by ongoing monetary easing and favorable economic conditions, though profit-taking may cause short-term fluctuations.