The Pakistan Stock Exchange (PSX) rebounded on Friday, recovering from two consecutive days of losses, as investor confidence was restored. Fresh buying momentum emerged as investors seized value opportunities following a prolonged period of heavy selling.
The KSE-100 Index, the benchmark index of the PSX, rose by 1,246.93 points, or 1.13%, reaching an intraday high of 111,670.25 during early trading.
“After two days of decline, the market seems to be recovering. It appears that profit-taking and market correction are done for the time being,” said Samiullah Tariq, Head of Research at Pak-Kuwait Investment Company.
The rally came amid key economic updates and policy announcements. Federal Board of Revenue (FBR) Chairman Rashid Mahmood Langrial disclosed a significant Rs7.1 trillion tax gap, with Rs2.4 trillion of this attributed to income tax shortfalls.
At the same time, Finance Minister Muhammad Aurangzeb reiterated the government’s goal to increase the tax-to-GDP ratio from 9-10% to 13.5%. The Tax Laws (Amendment) Bill, 2024 aims to impose stricter restrictions on non-filers, barring them from acquiring high-value assets such as vehicles over 800cc, expensive properties, or engaging in large financial transactions.
Despite these policy updates, external economic challenges persist. The State Bank of Pakistan (SBP) reported a decline of $228 million in foreign exchange reserves, bringing the total to $11.85 billion as of December 20. Combined reserves, including those of commercial banks, decreased by $261 million to $16.372 billion.
However, this decline still represents a significant improvement from the dangerously low reserves of $2.9 billion in February 2023, bolstered by a $200 billion rate cut by the SBP, which strengthened macroeconomic fundamentals.
Encouraging economic data also supported the market’s recovery. Exports increased by 12.57% to $13.691 billion during the first five months of FY2024-25, compared to $12.162 billion in the same period last year. Exports to the EU and broader Asia were steady at $4.8 billion each, while shipments to the US, Pakistan’s largest trading partner, grew by 14% to $2.4 billion. However, exports to China fell by 14%. Meanwhile, exports to the UAE and Afghanistan saw significant growth, rising by 35% and 42%, respectively.
Foreign direct investment (FDI) also showed strong growth, rising by 31% year-on-year to $1.124 billion, with $219 million recorded in November.
Other positive macroeconomic indicators included a current account surplus of $729 million in November, the largest in a decade, reversing the $148 million deficit from November 2023. Over the first five months of FY2024-25, the current account surplus reached $944 million, compared to a $1.67 billion deficit during the same period last year.
Furthermore, Pakistan’s credit default swap (CDS) spreads have tightened by 88%, signaling reduced credit risk and improved investor confidence.
