KARACHI: The Pakistan Stock Exchange (PSX) attracted renewed buying interest across all sectors following the easing of geopolitical tensions and clarity on the federal budget announcement, which helped the benchmark KSE 100 index close the outgoing week on a positive note.

The expected relief package for the agricultural sector and measures to boost exports and industrial growth in the upcoming budget restored investor confidence, which led to value hunting, taking the index to its all-time high level near the 120,000 mark by the close of the last week of the outgoing month.

After extending the date by a week, the government has announced that there will be no further delay and the federal budget for 2025-26 will be announced on June 10.

According to AKD Securities Ltd, the market remained range-bound throughout the week, weighed down by uncertainty regarding potential revenue measures in the upcoming Federal Budget for FY26, trading within a narrow range of 1,770 points. The benchmark KSE-100 index, increased by 588 points or 0.49pc week-on-week to close at 119,691 points on Friday.

Market participation improved, with average daily traded volume rising by 34.6pc week-on-week to 662m shares, up from 492m shares in the previous week.

Notably, the IMF concluded its staff mission last week on the Federal Budget FY26, stating that discussions on the upcoming budget proposals were constructive, while further deliberations will remain ongoing.

Furthermore, China has assured Pakistan of $3.7bn in refinancing in June, which will allow Pakistan to meet IMF’s foreign exchange reserves target of $14bn by the FY25 end. Additionally, the government is reportedly close to finalising a financing agreement aimed at retiring circular debt in the power sector.

On the currency front, the rupee depreciated marginally by 0.02pc week-on-week to close at Rs282.02 to the US dollar.

According to Arif Habib Ltd (AHL), the PSX experienced a rollercoaster ride in May, primarily influenced by a brief episode of geopolitical tension.

In the first week, the index stayed mostly negative amid rising Pak-India tensions and escalation concerns. On May 8, the index recorded its steepest single-day decline points-wise, plunging by 6,482 points to close at 103,527.

On a monthly basis, PSX posted a massive return of 7.51pc in May. The benchmark index, which reached an intra-month high of 120,699 after opening at 112,820, fell to an intra-month low of 101,599. However, by the end of the month, it managed to close at 119,691 marking a comprehensive gain of 8,365 points.

As the geopolitical environment stabilised, investor confidence returned, and the market rebounded strongly. The index rose by 10,123 points (9.45pc) in a single day, closing at 117,298, marking the highest one-day gain in the index’s history in both absolute and percentage terms.

Alongside the easing of tensions, positive economic developments helped support the market recovery. Pakistan received approval from the International Monetary Fund for $1bn under the Extended Fund Facility (EFF) and $1.4bn under the Resilience and Sustainability Facility (RSF), providing a boost to external financing.

The SBP reserves increased by 13pc month-on-month to $11.5bn by the end of May, primarily due to disbursements received from the IMF.

Sectors contributing positively to the index during May include banks (2,328 points), fertiliser (1,192 points), E&P (917 points), cement (885 points), and investment banks (822 points). However, the sectors contributing negatively comprised of Auto Assemblers’ (-56 points) followed by tobacco (-6 points), Autos Parts (-6 points), Synthetics (-1 points), Vanaspati (-0.5 points).

Outlook

The month ahead carries significant weight for Pakistan’s economic direction, with two key events poised to shape market sentiment. First up is the Federal Budget FY26, which will outline the government’s fiscal roadmap. Closely following the budget is the MPC meeting in June. With inflation on a moderating path and real interest rates remaining high, market participants are anticipating a possible rate cut. Should the central bank decide to ease policy, it would likely act as a strong tailwind for equities.

The KSE-100 index is currently trading at a price-to-earnings ratio of 6.4x compared to its 10-year average of 8.0x offering a dividend yield of 8.4pc compared to its 10-year average of 6.5pc.

Published in Dawn, June 1st, 2025