2) The PSX Rate Transmission Chain (Plain English)
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Policy rate moves → funding costs change.
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Discount rates reset → P/E and dividend yields reprice.
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Sector rotation → capital moves toward rate beneficiaries.
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Earnings follow → with a lag.
Missing step 1 means misreading steps 2–4.
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.
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