Capital markets rallied on Friday after two consecutive losses, signaling a recovery in investor confidence.
Fresh buying momentum emerged as investors took advantage of value opportunities after a prolonged period of heavy selling.
The benchmark KSE-100 index of the Pakistan Stock Exchange (PSX) rose 1,246.93 points or 1.13 percent to touch an intraday high of 111,670.25 in early trade.
“The market is recovering after a two-session decline. It seems that profit-taking/correction is currently in place,” said Samiullah Tariq, head of research at Pak-Kuwait Investment Company.
The rally came amid notable economic updates and policy announcements. Federal Board of Revenue (FBR) Chairman Rashid Mehmood Langriyal revealed a tax gap of Rs 7.1 trillion, which is due to Rs 2.4 trillion in income tax.
At the same time, Finance Minister Muhammad Aurangzeb reiterated the government’s commitment to increase the tax-to-GDP ratio from 9-10 percent to 13.5 percent. The Tax Laws (Amendment) Bill, 2024 aims to impose stricter restrictions on non-filers, preventing them from acquiring vehicles above 800cc and expensive properties or making large financial transactions.
Despite these policies, external economic pressures persist.
The State Bank of Pakistan (SBP) reported a drop in foreign exchange reserves of $228 million, bringing the total to $11.85 billion as of December 20. Combined reserves, including commercial banks, fell by $261 million to $16,372. Billion dollars left.
However, it marks a substantial improvement from the alarmingly low level of $2.9 billion in February 2023, supported by a $200 billion rate cut by the SBP that strengthened macroeconomic fundamentals.
Trade and investment data also provided encouraging signs of economic resilience. Exports rose 12.57 percent to $13.691 billion during the first five months of FY 2024-25, as against $12.162 billion in the same period last year. Exports to the European Union and the wider Asian region totaled $4.8 billion, while shipments to Pakistan’s largest trading partner, the United States, rose 14 percent to $2.4 billion.
In contrast, exports to China fell by 14 percent. Exports to the United Arab Emirates and Afghanistan recorded significant growth, increasing by 35% and 42% respectively. Foreign direct investment (FDI) also rose 31 percent year-on-year to $1.124 billion during the same period, up from $219 million recorded in November.
Other macroeconomic indicators reflect positive momentum. Pakistan recorded a current account surplus of $729 million in November, the largest in a decade, reversing a deficit of $148 million recorded in November 2023. A loss of $1.67 billion was recorded during the same period last year.
Additionally, the country’s credit default swap (CDS) spreads have increased by 88%, indicating reduced credit risk and improved investor confidence.