Pakistan's Stock Index Hits Record High Amid Economic Challenges

On a recent trading day, the leading stock index in Pakistan reached unprecedented levels, as the numbers on the Pakistan Stock Exchange indicated an all-time high of 60,500.61 points.

With such a remarkable milestone, market players are now speculating on the potential for a decrease in the central bank's policy interest rate, which stands at an all-time high of 22 percent. This expectation stems from the recent easing of inflation rates which have shown signs of topping, with a decline to 26.9 percent year-on-year as observed in October.

Economic Optimism Fuels Market Success

Despite facing a multitude of political and fiscal challenges, the Pakistani stock market has exhibited robust growth, rising more than 48 percent this year buoyed in part by the approval of a $3 billion loan from the International Monetary Fund (IMF) in July. This financial aid aims to prevent the nation from defaulting on its sovereign debt.

Market analysts are also reacting positively to a successful negotiation of funds from the IMF and anticipate further financial injections in December. This comes as the second tranche of the current Standby Arrangement with the IMF and is expected to support foreign exchange reserves.

Market Valuation Remains Attractive

According to Tahir Abbas, head of research at Arif Habib Limited, the market's surge to record highs does not diminish the appealing valuation, noting that the KSE100 index is trading at a price-to-earnings multiple of just 4.5 times, which is below the 5-year average of 6 times. This suggests that, despite the highs, stocks may still be undervalued.

Another key factor inspiring investor confidence is the sustained profitability and generous dividend payouts of companies within the index, which promise potential for further financial gain.

stock, inflation, investment