PSX hits new record high as Pakistan-Saudi defence pact sparks rally

The bourse rallied to unprecedented heights on Thursday, fuelled by strong sentiment after Pakistan and Saudi Arabia signed a strategic defence agreement

“The news about the defence partnership has brought excitement across the board. This is a major macro rerating game changer that can pour more liquidity and reduce risk premium," AAH Soomro, an independent investment and economic analyst.

"The index may head upwards without corrections,” he added.

The Pakistan Stock Exchange’s (PSX) benchmark KSE-100 Index settled at 157,953.46 points, up 1,775.65 points, or 1.14%, from the previous close of 156,177.81.

During the session, the index climbed to an intraday high of 158,082.55 points, gaining 1,904.74 points, or 1.22%. The session low was recorded at 156,978.85 points, still higher by 801.04 points, or 0.51%.

Pakistan and Saudi Arabia on Wednesday formalised a landmark Strategic Mutual Defence Agreement, pledging to treat any aggression against one country as aggression against both.

The pact was signed during Prime Minister Shehbaz Sharif’s state visit to Riyadh, where he was received by Crown Prince and Prime Minister Mohammed bin Salman at Al-Yamamah Palace.

The pact reflects a joint commitment to enhance bilateral security ties and contribute to regional and global peace, the statement said. It aims to develop defence cooperation further and strengthen joint deterrence against any aggression. Crucially, the agreement stipulates that any aggression against one country shall be considered aggression against both.

The government raised Rs195 billion from the auction of market Treasury bills (T-bills) on Wednesday, surpassing its Rs175 billion target. However, it rejected bids for the 10-year floating-rate Pakistan Investment Bond (PIB) as investors demanded higher returns.

The T-bill auction drew participation worth Rs1.07 trillion, with yields ending nearly flat. The cut-off yield on a one-month paper eased by 1 basis point (bp) to 10.7445%. The three-month bill yield stood unchanged at 10.8502%, while the six-month paper edged down 1bp to 10.8376%. The 12-month yield also stayed steady at 10.9999%.

The State Bank of Pakistan (SBP) on Monday held its policy rate steady at 11% for the third consecutive meeting, citing inflation concerns amid devastating floods. Since June 2024, the central bank has slashed rates by a total of 1,100bps, but kept them unchanged in June, July, and now September.

By comparison, in the previous session on Wednesday, the KSE-100 Index closed almost flat, down 3.12 points to 156,177.82 from 156,180.94. The day’s high was 157,196.59 points, while the low stood at 155,960.36 points.