Stocks likely to sustain upward momentum next week

KARACHI: The Pakistan Stock Exchange (PSX) is expected to sustain its upward momentum next week, buoyed by improved investor confidence following the successful staff-level agreement with the International Monetary Fund (IMF) for the second review of the Extended Fund Facility (EFF) and the first review of the Resilience and Sustainability Facility (RSF).

According to AKD Research, falling fixed income yields, enhanced credit ratings by global agencies, and limited alternative investment avenues continue to make local equities attractive, with the KSE-100 index trading at a multiple of 7.3 times while offering a dividend yield of 6.7 per cent.

Investor optimism is further supported by the potential for renewed foreign portfolio and direct investment inflows, driven by improving relations with the US and Saudi Arabia.

The market ended the week on a positive note despite heightened volatility driven by geopolitical uncertainty between Pakistan and Afghanistan. The benchmark KSE-100 index gained 708 points, or 0.4 per cent week-on-week (WoW), closing at 163,806 points. Tuesday marked the week’s highlight with a strong single-day gain of 7,033 points. Market participation also strengthened, with average daily trading volumes up 36 per cent week-on-week to 2.2 billion shares from 1.6 billion shares previously.

On the macroeconomic front, petroleum imports for September 2025 stood at $1.2 billion, down 11 per cent year-on-year (YoY), while textile exports were recorded at $1.6 billion, down 2 per cent YoY.

Meanwhile, Roshan Digital Account inflows rose 17 per cent YoY to $196 million, and large-scale manufacturing (LSM) output increased by 0.5 per cent YoY in August.

The State Bank of Pakistan’s (SBP) foreign exchange reserves improved by $21 million WoW to reach $14.4 billion as of October 10, while the Pakistani rupee appreciated marginally by 0.03 per cent to close the week at 281.1 against the US dollar.

Wadee Zaman, an analyst at JS Research, noted that the market experienced considerable intra-week volatility, dipping to an intra-day low of 157,678 points amid border tensions and nationwide protests. However, sentiment recovered swiftly as tensions eased, and the IMF agreement renewed investor confidence.

The IMF projected Pakistan’s GDP growth at 3.6 per cent and inflation at 6.0 per cent for FY26, while the net debt-to-GDP ratio is expected to rise by 0.4 per cent YoY.

Zaman also highlighted that recent floods caused damages worth Rs822 billion, affecting over 229,000 houses nationwide.

Additionally, Pakistan signed a memorandum of understanding with China worth RMB5 billion to address the country’s water crisis. On the fiscal front, the government raised Rs507 billion through Pakistan Investment Bonds (PIBs) and Rs776 billion via T-bills, with PIB yields inching up 13-21 basis points.

Nabeel Haroon, an analyst at Topline Securities, attributed the modest 0.44 per cent weekly gain to institutional profit-taking and geopolitical uncertainty.

Sector-wise, vanaspati and allied industries, commercial banks, investment banks, power generation & distribution, and paper and board outperformed, while close-end mutual funds, leasing companies, modarabas, textile weaving, and leather and tanneries lagged behind.

Despite short-term volatility, analysts believe the market’s fundamental outlook remains strong, driven by attractive valuations, improved macroeconomic indicators, and potential foreign inflows. The KSE-100 index is expected to continue its gradual upward trajectory in the coming week as investors build positions in anticipation of sustained economic stability.