ISLAMABAD: Pakistan’s benchmark stock index surged to a record high on Monday, lifted by strong corporate earnings and robust local institutional buying, while a survey showed most market participants expect the central bank to hold interest rates steady at its meeting later this month.
The Karachi Stock Exchange’s KSE-100 index gained as much as 1,922 points before settling up 1,810 points, or 1.17 percent, at 156,087. Investor flows into heavyweights such as Engro, Hub Power, Lucky Cement, Mari Petroleum and Sui Northern Gas helped drive the rally, adding more than 1,100 points to the index.
“Better-than-expected corporate earnings and strong local liquidity propelled the benchmark into uncharted territory,” said Maaz Mulla, vice president of equity sales at Topline Securities, a top brokerage house.
Engro alone contributed over 400 points to the day’s rise after the brokerage reiterated a “buy” call on the stock, Mulla added.
Total market participation remained high, with 1.12 billion shares traded at a value of PKR 62.2 billion.
POLICY OUTLOOK
Separately, a Topline survey said the State Bank of Pakistan (SBP) was expected to keep its key interest rate unchanged at 11 percent when its monetary policy committee meets on Sept. 15, with 72 percent of respondents forecasting no move.
The SBP began cutting its policy rate from a record 22 percent in June 2024, delivering 10 percentage points of easing by January 2025. It paused at 12 percent in March, cut further in May to 11 percent, and has held steady through June, July and August amid inflation concerns and flood-related risks.
The policy rate is the main tool used by the SBP to control inflation. A higher rate makes borrowing more expensive and slows demand, while lower rates can spur growth but risk fueling price increases.
“Looking at current market conditions and inflation outlook, we believe the SBP will maintain the policy rate at 11 percent in the upcoming monetary policy,” Topline Securities said in its survey report.
Topline also warned that the devastation of the 2010–2011 floods — Pakistan’s worst on record, which submerged a fifth of the country and cut rice production by about 30 percent — showed how climate disasters can fuel food inflation.
“The area under cultivation of wheat, rice and cotton fell between 3 and 18 percent,” it noted, adding that this year’s ongoing floods could trigger similar supply shocks.
Market signals also reflect expectations of stability. The six-month KIBOR — a key interbank lending rate — and yields on short-term government securities have shown little change since the last SBP meeting.
Topline projects inflation averaging 6–7 percent in fiscal year 2026 and expects gradual cuts later, bringing the policy rate to around 10 percent by mid-2026 once flood-related pressures subside.
Pakistan remains under a $7 billion International Monetary Fund program that emphasizes maintaining prudent monetary policy alongside reforms to stabilize the currency and strengthen transparency.
