Karachi, March 1, 2025 – The Pakistan Stock Exchange (PSX) is expected to witness positive investor sentiment in the upcoming week, driven by major economic developments and improved market conditions.
Analysts at Arif Habib Limited attribute this optimism to the upcoming IMF mission and the first review of the bailout program, which could enhance investor confidence at the PSX.
Inflation for February 2025 is projected to decline to 2.2%, the lowest level since October 2015. This drop in inflation is likely to provide further support to investor confidence, fueling trading activity at the PSX. Additionally, with the ongoing corporate earnings season, several stocks are expected to remain in the limelight as investors anticipate strong financial results.
The benchmark KSE-100 index at the PSX is currently trading at a price-to-earnings ratio (PER) of 6.2x (2025), compared to its 10-year average of 8.0x, offering an attractive dividend yield of ~8.2%, which is significantly higher than the 10-year average of ~6.5%.
This week, the market closed in the green zone, supported by improved liquidity and positive developments, including discussions regarding an additional USD 1 billion climate funding under the IMF’s USD 7 billion Extended Fund Facility (EFF). A key highlight was the signing of a Memorandum of Understanding (MoU) between Pakistan and Iran, aimed at increasing bilateral trade volume to USD 10 billion. However, investors exercised caution as they monitored potential corporate and provincial tax reforms ahead of the IMF’s review for Federal Budget FY26 approvals.
On the macroeconomic front, the State Bank of Pakistan (SBP) reported a USD 21 million increase in foreign exchange reserves, bringing the total to USD 11.2 billion, while the PKR depreciated slightly by 0.04%, closing at 279.57 per USD. The KSE-100 index closed at 113,252 points, reflecting a 450.7-point gain (0.40%) on a WoW basis.
Sector-wise, PSX gains were led by Commercial Banks (510 points), Glass & Ceramics (83 points), Power Generation (78 points), E&Ps (68 points), and Food (47 points). Conversely, Technology & Communication (-109 points), Investment Banks (-31 points), Engineering (-23 points), and Insurance (-21 points) contributed negatively.
Foreign investor outflows continued, with net selling amounting to USD 6.0 million, compared to USD 5.1 million last week. The highest foreign selling was recorded in Banks (USD 3.9 million), followed by All Other Sectors (USD 1.3 million). Meanwhile, local investors, particularly Mutual Funds (USD 31.6 million) and Brokers (USD 0.8 million), stepped in as net buyers. PSX trading volumes averaged 492 million shares, reflecting a 17% decline WoW, while the average traded value settled at USD 86 million, a 0.6% decline WoW.
Overall, the PSX outlook remains optimistic, with investor sentiment driven by economic improvements, favorable corporate earnings, and ongoing IMF discussions.