SBP Rate Cut Fuels Stock Market Surge Amid Economic Optimism

Karachi: The stock market maintained its upward trajectory this week, spurred by investor confidence following an unexpected 50 basis points rate cut by the State Bank of Pakistan (SBP). The central bank’s decision, announced during the Monetary Policy Committee meeting on Monday, defied market expectations of maintaining the status quo.

Investor sentiment received an additional boost as the current account recorded a surplus of $100 million in November. The benchmark index reached an all-time high on Thursday, closing at 171,960 points, but experienced profit-taking on the final trading day, concluding the week at 171,404 points—an increase of 1,539 points or 0.91% compared to the previous week.

Despite the market’s bullish momentum, participation saw a decline of 5.6% week-on-week, with average daily traded volume decreasing to 1.2 billion shares from 1.3 billion shares the prior week. On the macroeconomic front, textile exports for the first five months of fiscal year 2026 rose by 3% year-on-year to $7.8 billion, while petroleum imports fell by 2% to $6.4 billion.

Foreign exchange reserves held by the SBP increased by $1.3 billion week-on-week, reaching $15.9 billion as of December 12, bolstered by the International Monetary Fund’s disbursement under the Extended Fund Facility and Rapid Financing Instrument. The Pakistani Rupee appreciated marginally by 0.02% against the US dollar, closing the week at 280.25 PKR/USD.

Looking ahead, analysts foresee continued momentum in the KSE-100 index, driven by successful disbursements under international financial programs, a favorable monetary environment, and improved credit ratings. Investor sentiment is anticipated to further improve with potential foreign investments, supported by strengthened relations with the United States and Saudi Arabia.

The positive outlook is underpinned by limited alternative investment opportunities and attractive local equity valuations, with the KSE-100 trading at a multiple of 8.1x and offering a dividend yield of 6.5%. Top investment picks include major financial and industrial players such as MEBL, MCB, HBL, OGDC, PPL, PSO, ENGROH, LUCK, DGKC, FCCL, ILP, and INDU, according to AKD Securities Limited.