As trading resumes next week after a shortened schedule, investors are keenly watching the Pakistan Stock Exchange (PSX) to see whether the market will sustain its recent upward momentum.
Analysts at Arif Habib Limited believe the answer is yes, forecasting that the positive sentiment will continue, driven by strong corporate earnings and potential progress on resolving the circular debt issue.
Currently, the benchmark KSE-100 Index of the PSX is trading at a forward Price-to-Earnings Ratio (PER) of 7.4x for 2026, compared with its 10-year average of 8.0x. This attractive valuation is coupled with a dividend yield of around 7.0%, above the historical average of 6.5%. The market’s upward run last week saw the index close at 145,383 points, gaining 4,348 points or 3.1% week-on-week. The rally was fueled by aggressive buying from local institutions and mutual funds, supported by the ongoing corporate result season.
Macroeconomic indicators also provided a tailwind. The Ministry of Finance reported that the fiscal deficit narrowed to PKR 6.2 trillion (5.4% of GDP) in FY25 from 6.8% in FY24, mainly due to strong growth in tax and non-tax revenues. Cement dispatches in July jumped 30.1% on the back of robust export orders and domestic demand recovery post-Eid.
In the MSCI Index Review for August 2025, FABL was added to the FM Standard Index, while IDYM and JGICL joined the Small Cap Index, replacing HABSM and OCTOPUS. Petroleum sales in July rose 2% year-on-year to 1.22 million tons, aided by lower retail fuel prices.
However, there are cautionary signs. The SBP’s foreign exchange reserves fell by USD 72 million to USD 14.23 billion, and the latest T-Bill auction raised PKR 386.1 billion, slightly below the target. Despite this, the PKR appreciated 0.1% week-on-week to close at 282.47 against the USD, adding to the PSX’s upward narrative for the coming week.