The capital market recovered on Friday after two consecutive sessions of losses, indicating a recovery in investor confidence.
Fresh buying momentum emerged as investors capitalized on value opportunities after a prolonged period of strong selling.
The Pakistan Stock Exchange (PSX) benchmark KSE-100 index rose 1,246.93 points, or 1.13%, in early trade, hitting an intraday high of 111,670.25.
“The market is recovering after two sessions of decline. It seems like the profit taking/correction is done for now,” 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 Mahmood Langrial revealed a staggering fiscal gap of Rs 7.1 trillion, of which Rs 2.4 trillion is attributed to shortfalls 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% to 13.5%. The Tax Laws (Amendment) Bill, 2024 aims to impose stricter restrictions on non-filers, prohibiting them from acquiring high-value assets such as vehicles over 800cc and expensive properties, or carrying out large financial transactions.
Despite these policy advances, external economic pressures persist.
The State Bank of Pakistan (SBP) reported a decline of $228 million in foreign exchange reserves, reducing the total to $11.85 billion as of December 20, with combined reserves, including commercial banks, falling by $261 million to 16,372 million dollars.
However, this is a substantial improvement from the dangerously low levels 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% to $13.691 billion during the first five months of fiscal year 2024-25, compared to $12.162 billion in the same period last year. Exports to the EU and the broader Asian region amounted to $4.8 billion each, while shipments to the United States, Pakistan’s largest trading partner, rose 14% to $2.4 billion.
On the contrary, exports to China decreased by 14%. Significant growth was recorded in exports to the United Arab Emirates and Afghanistan, which increased by 35% and 42% respectively. Foreign direct investment (FDI) also increased 31% year-on-year to $1.124 billion during the same period, with $219 million recorded in November.
Other macroeconomic indicators reflect positive momentum. Pakistan posted a current account surplus of $729 million in November, the largest in a decade, reversing the $148 million deficit recorded in November 2023. During the first five months of fiscal year 2024-25, the surplus in current account reached $944 million, a sharp change from the $1.67 billion deficit recorded during the same period last year.
Additionally, the country’s credit default swap (CDS) spreads have narrowed by 88%, indicating reduced credit risk and increased investor confidence.
