The capital market rebounded on Friday, after two consecutive sessions of losses, signaling renewed investor confidence.
Fresh buying momentum emerged as investors took advantage of value opportunities following a prolonged period of sell-off.
The Pakistan Stock Exchange’s (PSX) benchmark KSE-100 index rose 1,620.45 points, or 1.47 percent, in early trade, hitting an intraday high of 112,043.77.
“The market is rebounding after two sessions of decline. It appears that profit taking/corrections are being done at the moment,” said Samiullah Tariq, head of research at Pak-Kuwait Investment Company.
This rally occurred against a backdrop of notable economic updates and policy announcements. Federal Board of Revenue (FBR) Chairman Rashid Mahmood Langrial has revealed a staggering tax gap of Rs 7.1 trillion, of which Rs 2.4 trillion is attributed to income tax shortfall.
Meanwhile, Finance Minister Muhammad Aurangzeb reiterated the government’s commitment to increase the tax-to-GDP ratio from 9-10% to 13.5%. The Tax (Amendment) Bill, 2024 aims to impose stricter restrictions on non-filers, barring them from acquiring high-value assets like vehicles above 800cc and expensive properties or carrying out transactions significant financial.
Despite these political developments, external economic pressures persist.
The State Bank of Pakistan (SBP) reported a $228 million drop in its foreign exchange reserves, bringing the total to $11.85 billion as of December 20, as the combined reserves, including commercial banks, dropped $261 million to $16.372 billion.
However, this marks a substantial improvement from the dangerously low levels of $2.9 billion in February 2023, supported by a $200 billion rate cut by the SBP that strengthened macroeconomic fundamentals.
Trade and investment data also provided encouraging signs of economic resilience. Exports increased by 12.57 per cent to $13.691 billion in the first five months of the financial year 2024-25, compared to $12.162 billion in the same period last year. Exports to the EU and the wider Asian region totaled $4.8 billion each, while shipments to the United States, Pakistan’s largest trading partner, rose 14 percent to $2. 4 billion dollars.
Conversely, exports to China fell by 14%. Significant growth was recorded in exports to the UAE and Afghanistan, which jumped by 35% and 42% respectively. Foreign direct investment (FDI) also increased 31% year-on-year to $1.124 billion during the same period, including $219 million recorded in November.
Other macroeconomic indicators reflect positive dynamics. Pakistan recorded a current account surplus of $729 million in November, the largest in a decade, reversing the deficit of $148 million recorded in November 2023. In the first five months of the financial year 2024-25 , the current account surplus reached $944 million, a sharp turnaround from the $1.67 billion deficit recorded during the same period last year.
Additionally, the country’s credit default swap (CDS) spreads tightened by 88%, indicating reduced credit risk and improved investor confidence.