Stock market outlook remains positive as IMF review nears

KARACHI: The stock market is expected to maintain its positive trajectory in the coming weeks with the upcoming IMF review and developments surrounding the circular debt issue likely to remain in focus.

According to AKD Research, the KSE-100 index will sustain its upward momentum, fuelled by robust earnings in fertilisers, resilient returns on equity in banks, and improving cash flows of exploration and production companies (E&Ps) and oil marketing companies (OMCs). Falling interest rates and improving macroeconomic stability are also expected to support investor confidence in the near term.

During the outgoing week, the market remained volatile but ultimately posted a marginal gain, with the benchmark KSE-100 Index closing at 154,440 points, up 162 points or 0.11 per cent week-on-week (WoW).

The week began on a strong note as investors reacted positively to better-than-expected corporate earnings and Chinese President Xi Jinping’s renewed commitment to accelerate CPEC 2.0 projects. However, the momentum slowed in the latter half as investors adopted a cautious stance ahead of the Monetary Policy Committee (MPC) meeting scheduled for September 15, 2025, amid concerns over flood damages and broader economic risks.

Average daily traded volume improved by 2.2 per cent, rising to 1.09 billion shares compared with 1.06 billion shares the previous week, while traded value averaged Rs52 billion.

On the macroeconomic front, Pakistan’s workers’ remittances for August 2025 stood at $3.1 billion, reflecting a 7.0 per cent year-on-year (YoY) increase though slightly lower on a month-on-month (MoM) basis. Auto sales continued to show recovery momentum, driven by a sharp surge in sales of small passenger cars.

Meanwhile, foreign exchange reserves held by the State Bank of Pakistan (SBP) increased by US$34 million week-on-week to $14.3 billion, while the rupee appreciated marginally by 0.04 per cent to close at Rs281.55 against the US dollar.

In the fixed income space, yields on longer-tenor Pakistan Investment Bonds declined by 11 basis points and 7 basis points for 10- and 15-year papers, respectively, settling at 12.04 per cent and 12.38 per cent, whereas the 2-year tenor yield inched up by 11 basis points to 11.2 per cent. Market participants largely interpreted the movement as a reflection of easing inflation expectations and a stable policy outlook.

Key developments during the week included agreements with the Asian Development Bank (ADB) and the Asian Infrastructure Investment Bank (AIIB) to provide guarantees enabling Pakistan to issue US$250 million worth of Panda bonds, the Federal Board of Revenue’s plan to raise the tax-to-GDP ratio to 18 per cent, and the signing of $601 million agriculture joint ventures with China.

Additionally, the government indicated plans to abolish cross-subsidies and peak rates in industrial power tariffs, a move expected to improve export competitiveness.

Sector performance was mixed, with leasing companies, tobacco, and engineering leading gains, up 17.1, 9.2, and 7.5 per cent respectively on a week-on-week (WoW) basis. In contrast, jute, property, and vanaspati & allied industries fell by 6.3, 6.2, and 5.1 per cent, respectively.

Flow-wise, local companies were the dominant buyers with net purchases of US$11.9 million, while foreign investors and other organisations registered net sales of US$8.4 million and US$3.7 million, respectively.

Nabeel Haroon, analyst at Topline Securities, noted that the KSE-100’s modest gain of 0.11 per cent reflected a slowdown in inflows from mutual funds, which had previously driven much of the rally.

Syed Danyal Hussain at JS Research highlighted that while the index touched an all-time intraday high of 157,817 points, profit-taking in the latter sessions kept the weekly close subdued. He added that upcoming IMF negotiations and the evolving industrial policy could play a crucial role in shaping investor sentiment.