PSX Maintains Bullish Momentum Amid Optimistic Market Sentiment

The Pakistan Stock Exchange (PSX) is poised to maintain its upward trend, as falling fixed income yields are expected to prompt a shift of funds from fixed income to equities, according to a report by AKD Securities.

The KSE-100 index showed strong momentum throughout the week, gaining 6,236 points (5.6%) to close at 117,587 points. Key contributors to the rally were Banking (2,082 points), Fertilizer (1,751 points), and Investment & Securities (696 points) sectors.

The removal of ADR tax and the implementation of additional taxation helped resolve uncertainty around the taxation regime, encouraging banks to focus on deposit growth. Investor confidence in fertilizer stocks surged due to higher dividend expectations and ongoing sector restructuring.

On the macroeconomic front, December inflation fell to a 7-year low of 4.1%, resulting in real positive interest rates of 890 bps, signaling potential rate cuts in the upcoming Monetary Policy Committee meeting. Statements from the Finance Ministry and Prime Minister suggesting single-digit interest rates fueled further optimism.

However, a 14% year-on-year increase in imports widened the trade deficit to $2.4 billion in December 2024. The GDP grew by 0.9% in Q1 FY25, supported by agriculture (1.2%) and services (1.4%) growth, while the industrial sector shrank by 1.0%.

During the week, the Prime Minister launched an Economic Revival Plan targeting 6% GDP growth by FY28, $60 billion in exports, and immediate measures to reduce electricity costs.

Market participation rose significantly, with average daily trading volumes increasing by 32% week-on-week to 1.04 billion shares from 0.79 billion shares in the previous week.

SBP reserves declined by $143 million week-on-week, standing at $11.7 billion as of December 27, 2024. Meanwhile, the FBR missed its revenue target for H1 FY25 by Rs386 billion, and the Federal Petroleum Minister announced that the sale of a 15% stake in Reko Diq would be finalized soon.

Operational data showed a 3% year-on-year increase in Oil Marketing Companies’ (OMCs) volumes for December 2024, with a 4% rise in H1 FY25. However, local cement sales fell 4.8% year-on-year in December 2024.

Additionally, the IMF rejected reduced sales tax rates for the refinery sector.

On the sectoral front, Engineering, Textile Spinning, and Banks led the mainboard gains, rising 10.6%, 8.1%, and 7.4% week-on-week, respectively.