PSX crosses 93,000-mark as energy sector refuels rate cut rally

• Analysts say investors drawing strength from economic optimism.
• Rally driven by energy stocks owing to strong cash flows, payouts.
• Lower government bond yields boost further rate cut expectations.

Stocks on Friday hit an all-time high above the 93,000-point mark as energy stocks rekindled a rally, triggered by a forecast-beating rate cut earlier this month, amid bets that the central bank is set to relax its monetary stance further before the year-end.

The Pakistan Stock Exchange's (PSX) benchmark KSE-100 Shares Index jumped by 771.20 points or 0.88%, touching 93,291 points around noon, up from yesterday's close of 92,520.48 points, after hitting an intraday high of 93,514 points.

Khurram Schehzad, CEO of Alpha Beta Core, said that investors were riding the wave of economic optimism set off by the State Bank of Pakistan (SBP) by extending its hawkish monetary policy on November 4 as inflationary pressures were easing.

"There are expectations of a policy rate cut of up to 400 basis points by December, as the room for easing exists," Schehzad said, hinting that the SBP’s Monetary Policy Committee (MPC) could revise rates downward before the end of this year.

Schehzad further said that the current bullish trend could largely be attributed to the extension of the central bank's rate-easing cycle.

The SBP cut its key policy rate by a record 250 basis points to 15%, exceeding expectations, as the country bid to revive a sluggish economy amid a big drop in the rate of inflation. 

The central bank justified the rate cut, stating that the current monetary policy stance is suitable to achieve price stability and maintain inflation within the 5-7% target range.

"This will also support macroeconomic stability and help achieve economic growth on a sustainable basis," it said.

Saad Ali, Director of Research at Intermarket Securities, told Geo.tv that current optimism was driven by the oil and gas stocks owing to their strong cash flows and payouts.

“Yesterday's Sukuk auction in which one-year FRD (fixed-rate discounted) yield fell to 10.99%, raising expectations of accelerated rate cuts down the line, which also boosted investors' morale,” Ali added.

The government raised Rs331.7 billion through an auction of Sukuk bonds on the PSX, surpassing its target of Rs300 billion for the 15th Government of Pakistan Ijarah Sukuk (GIS) auction, which attracted substantial interest, with bids reaching Rs 875.22 billion.

The cut-off yields for the FRD and fixed rental rate (FRR) Sukuk saw a marked decrease.

The one-year FRD yield dropped 76 basis points to 10.99%. In the FRR category, cut-off yields fell to 11.5% for the three-year (-50bps), 12.1% for the five-year (-43bps), and 11.7% for the 10-year (-104bps) Sukuk bonds.

Ahsan Mehanti from Arif Habib Corp said stocks hit a new all-time high as part of a broader bull run in global equities, supported by MSCI’s revised standard index weight of 4.4%, which is attracting foreign interest.

"Falling bank lending rates and declining government bond yields have been key catalysts, driving record bullish activity at the PSX," Mehanti added seconding Saad Ali's analysis.

This is a developing story and is being updated with more details.