PSX rallies on rate cut expectations

KARACHI:

Pakistan Stock Exchange (PSX) on Friday closed on a bullish note, surging nearly 700 points, as investors anticipated a reduction in the State Bank of Pakistan’s (SBP) key policy rate next week following a decade-low inflation reading of 1.5% in February 2025.

A strong rupee, ongoing government discussions on the privatisation of state-owned enterprises (SOEs) and efforts to resolve the circular debt problem ahead of the release of the International Monetary Fund’s (IMF) loan tranche next month further fueled investor confidence.
The benchmark KSE-100 index settled at 114,399, led by a rally in oil and cement stocks.

Analysts attributed the gains to government plans to borrow Rs1.25 trillion from banks at less than 11% interest to address the energy sector’s circular debt as well as declining global coal prices that benefited cement companies.

“Stocks closed higher as investors eyed a reduction in the SBP policy rate next week after a decade-low CPI inflation at 1.5% in February,” Ahsan Mehanti of Arif Habib Corporation said. A strong rupee, government deliberations over the privatisation of SOEs and expectations of resolution of the power-sector circular debt ahead of the release of IMF’s tranche played the role of catalysts in the bullish close at the PSX, he said.

At the end of trading, the benchmark KSE-100 index posted a surge of 685.52 points, or 0.60%, and settled at 114,398.70.
Arif Habib Limited (AHL) reported that on Friday, 61 stocks advanced while 33 declined. The top contributors to index gains were PSO (+7.7%), Fauji Cement (+9.45%) and Pakistan Petroleum (+1.43%) while the biggest drags were Fauji Fertiliser Company (-0.52%), Engro Holdings (-2.33%) and Systems Limited (-0.82%).

Overall, it was a solid week for the KSE-100, which gained 1% week-on-week. “Looking ahead, the index is expected to see strong gains, potentially surpassing the 116,000 level in the coming week,” AHL said.

Topline Securities wrote in its review that the market continued its previous day’s momentum as the KSE-100 index gained 0.6%. Oil and cement companies led the rally.

Oil companies were up on news that the government had reached a deal with commercial banks to borrow Rs1.25 trillion at less than 11% interest to settle circular debt and cement companies garnered investor interest from a recent decline in coal prices, it said.

The top positive contribution to the index came from PSO, Fauji Cement, Hub Power, Pakistan Petroleum, Pioneer Cement, Lucky Cement and Cherat Cement as they cumulatively contributed 513 points, Topline added.

JS Global analyst Muhammad Hasan Ather said that the KSE-100 index surged 685 points, which was attributed to government plans for a significant bank loan of Rs1.25 trillion at an interest rate below 11%, aimed at resolving the circular debt.

Additionally, anticipation of further monetary easing and declining global oil prices were positively influencing inflation expectations, boosting cyclical stocks. Looking forward, a smooth IMF programme review could propel the market out of its consolidation phase, paving the way for further growth and stability.

Overall trading volumes were recorded at 404.4 million shares compared with the previous session’s 373.1 million. The value of shares traded during the day was Rs27.8 billion.

Shares of 433 companies were traded. Of these, 219 stocks closed higher, 151 fell and 63 remained unchanged.

Fauji Cement was the volume leader with trading in 57.2 million shares, gaining Rs3.97 to close at Rs45.99. It was followed by Sui Southern Gas Company with 23.8 million shares, gaining Rs1.52 to close at Rs35.50 and Maple Leaf Cement with 22.5 million shares, gaining Rs2.12 to close at Rs56.63. During the day, foreign investors sold shares worth Rs772.5 million, according to the NCCPL.