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 gained 2,232.89 points, or 2.01%, to hit an intraday high of 113,584.06.
“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.
