The Pakistan Stock Exchange (PSX) kicked off the week on a high note, with the KSE-100 Index experiencing a significant uptick driven by a confluence of factors including reduced political uncertainty, improved macroeconomic indicators, and expectations of a more supportive monetary policy. The market was further bolstered by a record current account surplus and strategic plans to enhance Pakistan’s footprint in international financial markets.
The conviction of former Prime Minister Imran Khan and his wife, Bushra Bibi, last Friday, played a pivotal role in uplifting market sentiment. Accountability Court Judge Nasir Javed Rana’s verdict, sentencing Khan to 14 years and Bushra Bibi to 7 years in prison, alongside substantial fines, ended weeks of speculation. This development, as commented by Muhammad Saad Ali, Director of Research at Intermarket Securities Ltd, provided a sense of closure which has historically been a market mover. “Market reacting positively to the political development last Friday, of Khan not being acquitted, as it now sees low political temperature in the near term,” Ali noted, adding that political instability had previously caused the market to stall.
Finance Minister Muhammad Aurangzeb announced plans to launch Panda Bonds by June 2025, aiming to tap into China’s capital markets for approximately $200 million. This initiative is part of a broader strategy to foster an export-driven economy and maintain sustainable balance of payments, alongside meeting the conditions set by the International Monetary Fund (IMF) under the $7 billion Extended Fund Facility (EFF).
Prime Minister Shehbaz Sharif underscored the importance of digital growth in a statement from the Prime Minister’s Office, welcoming Pakistan’s inclusion in the World Economic Forum (WEF) and Digital Cooperation Organisation’s (DCO) Digital Foreign Direct Investment Initiative (DFDII). The initial project under this will focus on digital infrastructure and services exports, potentially attracting significant Foreign Direct Investment (FDI). Notably, the country’s net FDI surged by 31% to $1.124 billion in the first five months of the fiscal year.
The State Bank of Pakistan (SBP) reported a staggering current account surplus of $1.2 billion for the first half of FY25, the highest in 15 years, largely due to increased remittances and export growth. December alone saw a surplus of $582 million, reflecting a 109% increase year-on-year. Moreover, inflation has shown signs of cooling with the Sensitive Price Indicator (SPI) increasing by just 1.16% year-on-year for the week ending January 16, marking the lowest rate in months, and even witnessing a weekly decline of 0.39%.
Market Performance and Future Outlook:
The KSE-100 Index closed at 115,844.81, a gain of 572.73 points or 0.5% from the previous session, with an intraday high of 116,276.42. This performance reflects sustained buying interest and optimism. Last week, the index had already gained 2,025 points or 1.8%, closing at 115,272 points, driven by attractive valuations and institutional investments. Analysts now anticipate that this trend might continue, with potential monetary policy adjustments possibly leading to a further reduction in the current policy rate of 13%, thereby enhancing investor sentiment.
Despite the positive trajectory, risks such as political uncertainty and volatile crude oil prices loom large, which could sway investor behavior in the coming sessions.
