Pakistan Stock Exchange Reaches Record High Amid Mideast Ceasefire

KARACHI: The Pakistan Stock Exchange (PSX) marked a historic milestone this week, closing at an unprecedented level of 124,379.06 points, reflecting a significant weekly gain of 4,356 points, or 3.6%. This surge was largely attributed to investor optimism following a ceasefire agreement between Iran and Israel, which alleviated geopolitical anxieties and stimulated robust pre-fiscal year-end purchasing.

According to Topline Securities Ltd, the KSE-100 index experienced a remarkable upturn, gaining 4,355.83 points, buoyed by expectations of foreign investments and a reduction in regional tensions. Mid-week, the market recorded its second-largest single-day gain, rising by 6,079 points (5.23%) following the announcement of the ceasefire. Notably, this rally coincided with China’s indication to reschedule $1.8 billion in debt, providing further financial reassurance to investors.

In addition to the geopolitical developments, the government successfully raised Rs323 billion in the latest Treasury bill auction, with total participation reaching Rs2,299 billion. Yields on these bills decreased by 5 to 9 basis points, indicating a positive shift in the debt market.

However, the State Bank of Pakistan (SBP) reported a decline in its foreign exchange reserves, which fell by over $2.6 billion to $9.06 billion for the week ending June 20, primarily due to substantial external debt payments. The central bank anticipates a $3 billion inflow in the coming week, which could provide a boost to reserves.

The Pakistani rupee depreciated marginally by Rs0.02, closing at 283.72 against the US dollar. Despite a 14.4% decrease in average daily trading volume to 736 million shares, the total traded value surged by 40.8% to $110.4 million.

Arif Habib Ltd noted that market sentiment shifted from caution to optimism as the ceasefire unfolded, restoring investor confidence. The SBP also raised Rs345 billion in another Treasury bill auction against a target of Rs650 billion, while securing Rs251.5 billion through Government of Pakistan Ijara Sukuk, exceeding the target of Rs175 billion.

Sector-wise, the KSE-100 index gains were prominently driven by commercial banks (1,120 points), cement (691 points), fertilizer (629 points), exploration and production (577 points), and glass and ceramics (146 points). Conversely, the miscellaneous sector recorded minor losses.

Major gainers included Lucky Cement (382 points), Fauji Fertiliser (357 points), UBL (319 points), Meezan Bank (316 points), and OGDC (192 points). On the other hand, Pakistan Services Ltd (133 points), Packages Ltd (96 points), International Steels (7 points), Colgate-Palmolive (6 points), and SNGPL (5 points) were among the detractors.

Despite the positive market performance, foreign investors turned net sellers, offloading $11.78 million worth of equities, contrasting with net purchases of $0.46 million in the prior week. The principal selling was observed in the exploration and production sector ($2.4 million) and fast-moving consumer goods ($2.2 million). In contrast, domestic mutual funds and insurance companies emerged as significant buyers, acquiring $14.8 million and $6.15 million worth of stocks, respectively.

According to AKD Securities, although average daily trading volumes have declined, investor sentiment remains buoyant, bolstered by the recent federal budget approval for the fiscal year 2025-26 and the SBP’s commitment to achieve a foreign exchange reserves target of $14 billion, supported by expected inflows of $3.6 billion. Additionally, a 25% year-on-year increase in consumer confidence in the fourth quarter of CY2025—marking the highest level since 2022—and a 14% month-on-month boost in RDA inflows in May provide further optimistic indicators.

As the fiscal year approaches, the PSX is expected to sustain its upward momentum, driven by easing inflation expectations and robust corporate earnings. The consumer price index (CPI) for FY2026 is projected to decrease to 4.4% year-on-year, slightly down from 4.5% in FY25, potentially allowing room for monetary easing. Currently, the KSE-100 index trades at a forward price-to-earnings ratio of 6.4x for 2025, compared with its 10-year average of 8.0x, while offering a dividend yield of approximately 8.4%, significantly above the historical average of 6.5%.

With these developments, analysts predict a favorable outlook for the PSX, contingent upon continued geopolitical stabilization and favorable economic policies.