By 10:49 am, the KSE-100 index had risen by 770.68 points, or 0.95%, reaching 82,229.96 points from its previous close of 81,459.28 points.
Yousuf M Farooq, Director of Research at Chase Securities, linked this momentum to the decline in yields observed the previous day.
The market anticipates a significant drop in inflation and interest rates, he stated. Government securities now display a kinked yield curve, with 2-year and 5-year yields both higher than the 3-year yield.
Pakistan Investment Bonds (PIB) experienced a sharp 335 basis points reduction in the cut-off yield for the three-year tenor, while the government borrowed less than half of its target.
The significant decrease in interest rates, coupled with declining inflation, has shifted the economic landscape. On Wednesday, the government rejected all bids for treasury bills, signaling its intent to lower borrowing costs, which consume most of the tax revenue for debt servicing.
Shahbaz Ashraf, Chief Investment Officer at FRIM Ventures, pointed out that the market had risen by 3.6%, or 2,800 points, over the past week.
Ashraf attributed the "buoyant market performance" primarily to the International Monetary Fund (IMF) Board’s approval of the $7 billion Extended Fund Facility (EFF) and expectations of monetary easing in November.
Another crucial factor is the market's price-to-earnings (PE) ratio, which remains below 4.5x, compared to the historical average of 7 to 8x, he added.
Ashraf also cautioned that the FTSE rebalancing event, expected to occur partially today and continue over the coming weeks, posed a short-term risk. “However, if the market adjusts due to this event, it could present a buying opportunity at more favorable levels,” he said.
Awais Ashraf, Director of Research at AKD Securities, remarked that the rally was largely driven by the expected IMF Executive Board approval and a “decrease in interest rates, following a substantial drop in PIB cut-off yields in yesterday's auction.”
He also highlighted that commercial banks led the gains in the KSE-100 index, contributing 675 points, as concerns over non-performing loans diminished, supported by strong financial performance and improved solvency ratios.
On Thursday, the PSX’s benchmark index had surged nearly 1,000 points, with analysts attributing the rise to the US Federal Reserve's rate cut, the upcoming IMF Executive Board meeting scheduled for September 25th, and declining inflation figures.
