The capital market started the week on a positive note due to improving investor confidence and a bullish-friendly macroeconomic backdrop.
Factors such as optimism about economic recovery, reduced geopolitical tensions and accommodative monetary policies pushed the market higher.
The Pakistan Stock Exchange’s (PSX) benchmark KSE-100 index on Monday gained 1,686.81 points, or 1.51 per cent, to hit an intraday high of 113,037.98.
Despite the volatility, the stock market saw a partial recovery after a turbulent week. The benchmark KSE-100 index stood at 111,351 points at the end of last week, up 1,838 points, or 1.68% week-on-week.
Transactions by foreign investors were always net sales, with net sales of $6.8 million, mainly from the banking sector. This was offset by existing net buyers, local individual investors and banks/DFIs, softening the shock of foreign capital outflows.
The government managed to raise Rs913 billion through the latest Treasury Bill (T-bill) auction, but still failed to meet the target of Rs1.2 trillion. The three- and six-month limit yields were unchanged at 11.99%, while the 12-month limit yields were set at 12.29%. Reserves at the State Bank of Pakistan (SBP) fell by $228 million to $11.9 billion as external debt repayments persisted.
Pakistan’s economic fundamentals are healthy despite the slight decline in reserves. Imports fell 16.91% year-on-year in November and exports rose 17.56% year-on-year, resulting in a current account surplus of $729 million in November, the highest for a decade, while the exports of the financial year 2024-25 during the first five months increased by 12.57% year-on-year. It also reports a 31% increase in foreign direct investment (FDI) during this period.
Analysts also remained optimistic as the KSE-100 index returned 78%, making it the second best performer of any stock market in the world. Topline Securities forecasts a strong return of 55.5% for 2025, fueled by strong profits from the fertilizer and banking sectors and improving cash flow from exploration and production companies.
The PSX is expected to maintain its positive momentum in 2025, provided continued political stability, ample liquidity, and a positive economic policy direction.
PSX trades at a price-to-earnings (PE) ratio of 6x and offers significant upside potential in a stabilizing macroeconomic environment.