3) Banking: The First and Loudest Responder
Banks are the cleanest rate-cycle proxy on PSX.
Why banks react first
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Asset repricing is faster than liability repricing.
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Net Interest Margin (NIM) expands early in tightening cycles.
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Dividend yields look attractive when risk-free rates peak.
But: Prolonged high rates eventually raise credit risk and slow loan growth.
Interpretation rule:
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Early-high rates = banks outperform.
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Late-high rates = returns flatten; quality matters.
4) Energy & Power: Policy > Profits
Energy earnings are often regulated, but rates still matter because:
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Working capital financing costs rise.
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Receivables duration becomes expensive.
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Tariff adjustments lag funding stress.
During tight cycles, PSX discounts energy names even with stable profits. Relief comes after rate expectations turn.
5) Fertilizers: Cost Curves Meet Rates
Fertilizer demand is resilient, but margins are rate-sensitive through:
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Gas pricing structures
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Inventory financing
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Dealer credit terms
When rates are high, cost visibility matters more than volume spikes. This is why policy-linked cost relief can outperform demand-led narratives in tight cycles.
