Daily Times

The Pakistan Stock Exchange (PSX) rebounded sharply on Friday, shaking off Thursday’s record-breaking losses as investors seized attractive valuations and responded to encouraging economic signals.

The benchmark KSE-100 Index soared 1,568.62 points (1.48%), reaching an intraday high of 107,843.59. This remarkable recovery followed a week of extreme volatility and profit-taking that had triggered steep declines.

“Valuations have become attractive, prompting a recovery in the market,” remarked Samiullah Tariq, Head of Research at Pak-Kuwait Investment Company. He highlighted improved sentiment and enticing entry points as key factors driving the surge in buying activity.

Positive Economic Indicators Boost Investor Confidence

Recent data from the State Bank of Pakistan (SBP) added to the optimism, showing a 112% year-on-year increase in profit and dividend repatriations by multinational companies. In the first five months of FY2025, these repatriations amounted to $1.128 billion, with $321.6 million recorded in November alone—a staggering 586% year-on-year increase, despite a 22.3% month-on-month dip.

Additionally, Pakistan’s current account surplus reached $729 million in November, the largest monthly surplus since February 2015. For the first five months of FY2025, the cumulative surplus stood at $944 million, a significant improvement from the $1.67 billion deficit during the same period last year.

Foreign direct investment (FDI) also grew 31% year-on-year to $1.124 billion, while remittances surged 29% year-on-year in November to $2.9 billion, bringing the five-month total to $14.8 billion.

The SBP’s recent 200 basis point policy rate cut to 13%, coupled with easing inflation (now at a five-year low of 4.9%), underscored the government’s efforts to bolster economic growth.

Policy Shifts and Market Caution

While the recovery was strong, investor caution lingered due to proposed government measures targeting non-filers. The Tax Laws (Amendment) Bill, 2024, aims to restrict non-filers from purchasing high-value assets, opening bank accounts, or conducting large financial transactions.

The Federal Board of Revenue (FBR) has also been empowered to freeze accounts and properties of non-compliant individuals. These moves, while aimed at boosting tax compliance, have raised concerns about reduced liquidity and consumer spending.

From Steep Declines to a Strong Comeback

Friday’s recovery came on the heels of Thursday’s historic sell-off, which saw the KSE-100 Index plunge 4,795.32 points (-4.32%) to close at 106,274.97—the steepest single-day drop in PSX history. The massive sell-off was attributed to year-end mutual fund redemptions and institutional profit-taking, with heavyweight stocks like MARI (-10%), HUBC, UBL, OGDC, and ENGRO accounting for over 1,500 points of the decline, according to Topline Securities.

Despite the turmoil, trading activity remained robust, with 1,155 million shares exchanged and a turnover of Rs 56.6 billion.

Looking Ahead

The stock market’s sharp rebound reflects renewed confidence in Pakistan’s economic resilience and growth potential. With improving macroeconomic indicators, increased foreign investments, and supportive monetary policies, the PSX appears poised for sustained recovery.

As the year-end approaches, investors will be keeping a close watch on economic policies and global market trends. For now, Friday’s rally serves as a strong reminder of the market’s potential to bounce back, even in the face of historic challenges.