After opening the week in the red, stocks rallied on Tuesday, gaining more than 500 points in early morning trading.
As of 10:10 a.m., the benchmark KSE-100 had gained 536.04 points, or 1.25%, to 43,362.70 points.
First National Equities Limited chief executive Ali Malik said yesterday’s decision by the State Bank’s Monetary Policy Committee (MPC) to keep the policy rate unchanged at 15% for the next two months was a “surprise” for the Pakistan Stock Exchange (PSX) and had boosted investor confidence.
“It is expected that the market may start to recover from here. If political stability is maintained, the market may break above the 45,000 mark in the coming days,” he commented. .
Malik added that the continued increase in the volume of stocks traded on the PSX was an indicator that investors were making new entries.
Raza Jafri, head of cross-market securities research, noted that the MPC’s decision to hold its interest rate was the first such pause since monetary tightening began in September last year.
“Politics remains noisy in the background, but greater comfort on the economic outlook puts emphasis on valuations, which remain unmistakably cheap,” he added.
A day earlier, the State Bank of Pakistan (SBP) said that with recent inflation developments in line with expectations, domestic demand starting to moderate and the external position showing some improvement, it was prudent to suspend rate hikes at this stage.
“To cool the overheated economy and contain the current account deficit (CAD), the policy rate has been raised by a cumulative 800 basis points since last September, some temporary administrative measures have recently been taken to reduce imports and a strong Fiscal consolidation is planned for FY23,” he said in a statement.
Since the last meeting, the SBP noted that headline inflation had risen further to 24.9% in July, with core inflation also rising, it said.
The SBP said the withdrawal of the energy subsidy program will continue to manifest itself in inflationary results throughout the fiscal year – as well as the price dynamics of essential food products and the low rate. change last month.
The central bank estimates that the expected inflow of $1.2 billion from the International Monetary Fund will act as a catalyst for funding from multilateral and bilateral lenders.
Overall, the SBP noted that a deeper slowdown in global growth would not be as detrimental to Pakistan as to most other emerging economies, given the relatively low share of exports and foreign private inflows. in the economy.
As a result, inflation and the CAD are expected to decline as global commodity prices ease, while growth would not be as badly affected, the SBP said.