PSX gains momentum amid positive macroeconomic conditions

The stock market launched the week with a robust surge, propelled by revitalised investor confidence and a bullish macroeconomic environment.

Key drivers include optimism over economic recovery, easing geopolitical tensions, and pro-growth monetary policies, fuelling the market's strong upward trajectory.

The Pakistan Stock Exchange's (PSX) benchmark KSE-100 Index on Monday rallied 3,907.82 points, or 3.51%, to close at 115,258.99, hitting an intraday high of 115,422.34.

“Clarity on the banking sector taxation has provided impetus to the market,” said Samiullah Tariq, Head of Research at Pak-Kuwait Investment Company.

The federal government has recently brought much-needed clarity to the taxation framework for the banking sector, addressing a key concern for investors. The cabinet has approved an income tax ordinance that revises the method for calculating bank profits linked to the Advance Deposit Ratio (ADR), replacing it with a fixed maximum slab.

Led by Deputy Prime Minister Ishaq Dar, this agreement raises the banking sector's tax rate from 39% to 44%. The move is projected to generate an additional Rs70-75 billion in revenue by the end of December

Despite volatility, the equities market achieved a partial recovery following a turbulent week previously. The benchmark KSE-100 Index settled at 111,351 points at the end of the last week, up 1,838 points, or 1.68% week-on-week.

Foreign investor transactions were still on a net selling side, with net selling of $6.8 million, mainly from the banking sector. This was offset by existing net buyers local individual investors and banks/DFIs, which softened the blow of foreign outflows.

The government managed to raise Rs913 billion via the latest auction of Treasury Bill (T-bill), but still couldn’t hit the target of Rs1,200 billion. Three- and six-month papers had cut-off yields of 11.99% unchanged, while 12-month cut-off yields were set at 12.29%. The reserves with the State Bank of Pakistan (SBP) fell by $228 million to $11.9 billion as repayments of external debt persisted.

Pakistan’s economic fundamentals are healthy despite the small 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 in a decade, while FY2024-25 exports in the first five months grew 12.57% year-on-year. It also reports a 31% increase in foreign direct investment (FDI) during this time.

Analysts also remained upbeat as the KSE-100 Index posted a return of 78%, making it the second-best performance of any stock market in the world. According to Topline Securities, over the last 18 months, the PSX delivered an impressive 177% return in USD terms or 169% in PKR.

The PSX is expected to maintain its positive momentum in 2025, provided continued political stability, ample liquidity, and a positive shaping of economic policies.

PSX Chief Executive Officer (CEO) Farrukh Sabzwari also expressed optimism in an exclusive conversation with Geo News. He emphasised that "if there is stability in the country, 2025 will be the year of growth." Sabzwari underscored that stability is essential for achieving Federal Board of Revenue (FBR) goals, successful privatisation, and institutional improvements.

He highlighted the importance of policy continuity, noting that two years ago, Pakistan was on the brink of default, but now every number has been good for a year. Sabzwari further stressed the need to capitalise on the opportunities provided by economic stability.

"In 2025, the focus will be on increasing the number of investors and listings," he said, adding that women and youth should be a priority for expanding the investor base.