Moaaz Manzoor

Pakistan Stock Exchange (PSX) reached a record 86,000 benchmark in the second week of the current month, reflecting growing investor confidence and economic optimism, reports WealthPK.

Speaking to WealthPK, Tahir Abbas, Director of Equities at Arif Habib Limited, said the improvement in macroeconomic fundamentals played a crucial role in the stock market rally. “The recent boom in the PSX is a direct result of positive developments in key macroeconomic indicators. Inflation has been steadily coming down, and interest rate cuts are creating a more favorable business environment. Every major economic indicator shows signs of improvement, translating into higher investor confidence,” he said. He further shared his optimism about the future interest rate cuts, predicting a reduction by 3%, bringing the interest rate down to around 14% from its current level of 17%. “We expect the interest rate to decline further, which will significantly improve the business environment for both local and foreign investors. Furthermore, several key sectors like textile, cement, and pharmaceuticals are expected to experience a surge in growth in the coming months, driven by this improved economic landscape,” he further noted. Similarly, Faraz Hanif, a trader at General Investment & Securities, highlighted the broader economic factors contributing to the PSX’s upward trajectory.

“The interest rate cuts, stability of the Pakistani rupee against the US dollar, and increasing foreign investment have all contributed to the growing sense of optimism in the stock market,” Hanif explained. “The investors are seeing this as a sign of hope, which is why we’re seeing such a surge in the market.” Hanif also stressed the importance of maintaining political stability and ensuring that the ongoing agreements with the foreign investors reach maturity to sustain this momentum. “Political stability and foreign investor facilitation are crucial for maintaining this growth. If we can manage these aspects effectively, the stock market can continue to perform well.” However, he warned of potential external risks that could temper this optimism stating, “While the local factors are encouraging, we cannot ignore the possible negative impact of international events, particularly the ongoing conflict in the Middle East. A prolonged or escalating war could disrupt the global markets, including ours, and reduce the gains we’ve made.”

The future of the PSX looks promising due to the implementation of prudent policies. If the interest rates are reduced as expected, borrowing will become cheaper, and money will continue to flow into the market, leading to more investment across different sectors. Similarly, a sustained pattern of reduced inflation and a stable currency will boost the investor confidence even further. Sectors like textile, cement, and pharmaceuticals stand to gain the most due to the rising internal and foreign demand. Furthermore, maintaining political stability and successfully carrying out agreements on foreign investment could result in long-term stock market growth. However, external risks like the war in the Middle East and uncertainty surrounding the global economy could dim these hopes. However, owing to the prudent policy decisions, the PSX will continue to rise upward, indicating strong growth possibilities for Pakistan’s economy to move forward.

Credit: INP-WealthPk