KARACHI: Pakistan’s equity market posted modest gains during the outgoing week, underpinned by improved investor sentiment following a rare upgrade in the country’s sovereign credit rating and growing expectations of monetary easing.

However, lacklustre volumes and caution ahead of corporate earnings tempered the upward momentum, highlighting an underlying wait-and-see attitude among investors.

The benchmark KSE-100 index climbed 610 points or 0.44pc week-on-week to close at 139,207, fuelled by optimism surrounding the upcoming Monetary Policy Committee (MPC) meeting on July 30 and a favourable shift in global investor perception.

Topline Securities attributed the gains to the S&P Global upgrade of Pakistan’s long-term sovereign rating to ‘B-’ from ‘CCC+’, the first such improvement in six years. The rating agency cited macroeconomic stabilisation, improving fiscal indicators, and progress on reform as key drivers. The upgrade also helped compress yields on Pakistan’s Eurobonds and reinforced confidence in the outlook.

In the T-bill auction held during the week, the State Bank of Pakistan (SBP) raised Rs424.4bn against a target of Rs200bn, as yields dropped by 10-39 basis points across all tenors, reflecting growing expectations of a policy rate cut. Market participants widely expect the SBP to initiate monetary easing, with forecasts centred on a 50bps cut amid easing inflation and external account stability.

Benchmark index closes at 139,207, buoyed by improved credit rating, falling T-bill yields, and a stable rupee

Despite the positive triggers, investor participation weakened. Average daily trading volume declined 17pc week-on-week to 635 million shares, while traded value dropped 20pc to Rs28.6bn, indicating profit-taking and rollover pressures from July futures contracts.

According to Arif Habib Ltd, the index witnessed sharp intraday moves, with gains early in the week driven by corporate earnings optimism, followed by midweek profit-taking. Meanwhile, the rupee appreciated 0.5pc week-on-week to close at Rs283.45 against the US dollar — marking its strongest weekly gain in nearly two years — amid improving FX inflows and a clampdown on informal currency markets.

In June, repatriated profits and dividends plummeted 72.4pc year-on-year and 56.7pc month-on-month to $114.2m. However, cumulative repatriation in FY25 stood at $2.2bn, broadly unchanged from the previous year.

Power generation in June rose 2.1pc year-on-year to 13,744 GWh and increased 8pc month-on-month, reflecting higher seasonal demand. Conversely, oil and gas production fell 12pc and 7pc year-on-year, respectively, due to operational issues and lower industrial offtake.

SBP-held foreign exchange reserves declined by $69m to $14.46bn during the week ended July 18. On the macro front, the Asian Development Bank revised Pakistan’s FY25 GDP growth projection to 2.7pc, while the IMF linked the removal of a 4pc additional sales tax to expansion of the tax base. Meanwhile, the Economic Coordination Committee (ECC) approved Rs72bn subsidy for 50,000 housing units as part of the government’s construction stimulus.

Sector-wise, Food (up 6.2pc), Transport (4.8pc), and Auto Assemblers (4.2pc) led the gains, while Vanaspati & Allied Industries (down 13.1pc), Woollen (7.3pc), and Leather (4.3pc) were among the laggards. Foreign investors offloaded shares worth $7.6m, while other institutions sold $8.5m. Mutual funds and individuals absorbed the bulk of the selling with net purchases of $7.8m and $5m, respectively.

AKD Securities noted the market remained range-bound, trading within a 2,053-point band, but closed the week on a positive note. The brokerage anticipates continued strength in the coming weeks, supported by strong corporate earnings, falling interest rates, and stable macroeconomic conditions. It projects the index to reach 165,215 points by December, driven by robust earnings in fertilisers, sustained returns in banking, and improving cash flows in exploration & production and oil marketing companies.

Looking ahead, analysts expect July CPI to come in at 2.5pc year-on-year, down from 3.2pc in June, bolstering the case for a rate cut. Meanwhile, a government task force has been formed to address the Rs2.8 trillion gas circular debt, with proposals including commercial borrowing and a special levy for repayment.

Published in Dawn, July 27th, 2025