The Pakistan Stock Exchange (PSX) continued its impressive bull run on Monday, with the KSE-100 Index reaching a historic intraday high, breaking through the 94,000-point barrier. The index rose by 728.34 points, or 0.78%, to stand at 94,020.02 points at 10:37 am, up from its previous close of 93,291.68. This significant rise underscores the market’s positive momentum, fueled by encouraging economic indicators and a larger-than-expected interest rate cut.
The KSE-100’s upward trajectory comes on the heels of last week’s bullish streak, where the index closed above 93,000 for the first time, setting new records in nearly every session except one. Analysts attribute this trend to multiple factors, including recent monetary easing and an environment conducive to investment.
Market Drivers: Shift from Mutual Funds to Equities
In a low-interest rate environment, returns from fixed-income investments, such as bond-focused mutual funds, are relatively low. This is prompting investors to seek higher-yielding options like equities (stocks), which generally offer better returns over time, particularly in a stable economic climate.
As long as key macroeconomic indicators—such as GDP growth, inflation, and employment levels—remain stable, this trend of transitioning from mutual funds to equities is expected to continue. Stability in these economic factors can boost investor confidence in the stock market, making equities a more attractive alternative to low-yield fixed-income investments.
MSCI Inclusion and Sukuk Issuance Support Market Liquidity
Pakistan’s increasing weight in the MSCI index has also positively impacted market sentiment. In its latest quarterly review, MSCI raised Pakistan’s weight to 4.4%, making it the second most liquid market in the MSCI Frontier Markets Index. This increased weight boosts Pakistan’s visibility on the global stage and draws in foreign investment, adding liquidity and depth to the market.
Furthermore, the government’s recent Rs339 billion Sukuk issuance across various tenors has strengthened liquidity in the market. Yields on fixed-rate Sukuk declined by 43-104 basis points, enhancing their appeal to both institutional and individual investors.
Looking Ahead
As the PSX rides a wave of optimism, analysts remain bullish about its prospects, contingent on stable economic conditions and consistent policy support. For now, with growing investor confidence, record-breaking indices, and positive policy developments, Pakistan’s stock market appears poised for a sustained period of growth.
