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Broker busy in trading at Pakistan Stock Exchange (PSX) in Karachi on Thursday, December 5, 2024. — PPI
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The stock market opened the week with a strong rally, with investor confidence restored and the macroeconomic environment picking up.
Key drivers include optimism over an economic recovery, easing geopolitical tensions, and pro-growth fiscal policies, driving the market’s strong upside.
The benchmark KSE-100 index of the Pakistan Stock Exchange (PSX) closed up 3,907.82 points or 3.51 percent at 115,258.99 on Monday, touching an intraday high of 115,422.34.
“The banking sector’s tax clarity has given impetus to the market,” said Samiullah Tariq, head of research at the Pak-Kuwait Investment Company.
The federal government recently brought much-needed clarity to the tax framework for the banking sector, addressing a key concern for investors. The Cabinet has approved an Income Tax Ordinance that revises the method of calculating bank profits linked to the Advance Deposit Ratio (ADR), replacing it with a fixed maximum slab.
Led by Deputy Prime Minister Ishaq Dar, the agreement raises the banking sector’s tax rate from 39 percent to 44 percent. This initiative is expected to generate an additional 70-75 billion rupees by the end of December.
Despite the volatility, the equities market made a partial recovery after a turbulent first week. The benchmark KSE-100 index ended last week up 1,838 points or 1.68 percent week-on-week at 111,351 points.
Transactions by foreign investors were still on the net selling side, 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, which softened the blow of foreign outflows.
The government managed to raise Rs 913 billion through the latest Treasury Bill (T-bill) auction, but still missed the target of Rs 1,200 billion. could not The cut-off yields for the three- and six-month papers were unchanged at 11.99%, while the 12-month cut-off yield stood at 12.29%. was set. Reserves of the State Bank of Pakistan (SBP) declined by $228 million to $11.9 billion as external debt repayment continued.
Pakistan’s economic fundamentals are healthy despite a slight decline in reserves. Imports fell 16.91 percent year-on-year in November and exports rose 17.56 percent year-on-year, resulting in a current account surplus of $729 million in November, the highest in a decade, while fiscal year Exports in the first five months of 2024-25 grew by 12.57 percent year-on-year. It also reports a 31 percent increase in foreign direct investment (FDI) during this time.
Analysts were also 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, in the last 18 months, PSX has returned an impressive 177% in USD terms or 169% in PKR terms.
The PSX is expected to maintain its positive momentum in 2025, provided there is political stability, sufficient liquidity, and a positive formulation of economic policies.
PSX Chief Executive Officer (CEO) Farrukh Sabzwari also expressed hope in an exclusive conversation with Geo News. “If there is stability in the country, 2025 will be a year of growth,” he asserted. Sabzwari stressed that consolidation is essential for achieving the goals of the Federal Board of Revenue (FBR), successful privatization and institutional improvement.
Highlighting the importance of policy continuity, he said that two years ago, Pakistan was on the verge of default, but now every number has been good for a year. Sabzwari further said that there is a need to take advantage of the opportunities provided by economic stability.
“In 2025, the focus will be on increasing the number and listing of investors,” he said, adding that priority should be given to women and youth to expand the investor base.
