Pakistan Stock Exchange’s benchmark share index breached 100,000 points for the first time on Thursday and ended up 0.8%, closing at a record high.

The South Asian economy has been on a fragile path to recovery, helped by a $7 billion International Monetary Fund bailout that was approved in September. The benchmark index has surged 25% since July’s staff level agreement with the IMF, and is one of the top gainers across emerging markets.

The market is up more than 50% this year in dollar terms.

The index closed up more than 5% on Wednesday, recovering losses from the previous day, when it fell 3.6% on news of political clashes.

The market has jumped from 40,000 to 100,000 in 17 months, said Mohammed Sohail, CEO of Topline Securities, with the IMF bailout and new-found fiscal and monetary discipline improving investor sentiment.

A “faster-than-expected fall in inflation and interest rates have added cash liquidity,” Sohail added.

Pakistan slashed interest rates by a record 250 basis points to 15% earlier in November in a bid to revive its economy amid a big drop in inflation, which came in at 7.2% in October, from a multi-decade high of nearly 40% in May 2023.

Even with the rally, Pakistan shares have an average price-to-earnings ratio of around five, compared to a historical average of around seven.

However, Ahmad Mobeen, senior economist at S&P Global Market Intelligence, told Reuters that while investor sentiment had improved, the stock market surge “does not directly correlate with long-term growth prospects”.

“Sustainable growth will require addressing structural challenges, including low investment, high energy costs, under-taxed sectors, a consumption-heavy economy, and a large informal sector,” he said.

This follows a strong performance throughout the trading week. Trading opened on the fourth day of the business week with a positive trend.

Prime Minister Shehbaz Sharif has congratulated the nation on the KSE-100 Index surpassing the 100,000-point milestone.

In his message, the Prime Minister stated that this historic achievement reflects the business community and investors’ confidence in the government’s policies. He lauded the government’s economic team and officials working to promote investment in the country for achieving this milestone.

The Prime Minister reiterated his commitment to taking all possible steps to ensure economic stability and national development. He stated that he sacrificed his own political interests to save Pakistan from default, and that, by the grace of God, this sacrifice has not been in vain.

Shehbaz Sharif further highlighted the reduction in inflation, the 15% interest rate, and the record-high remittances as positive indicators of economic progress.