PSX Starts 2025 with a Record Surge, KSE-100 Index Hits New Heights

The Pakistan Stock Exchange (PSX) started the new year with an unprecedented surge, as the KSE-100 index rose by a substantial 1,881 points on January 3, 2025. This marked a historic achievement, with the index closing at an all-time high of 117,008.08 points, a 1.63% increase. The market’s upbeat performance reflects the growing confidence among institutional and local investors, who believe in the future growth potential of Pakistan’s economy.

Key Drivers of the Surge

The surge in the stock market can be attributed to several key factors that have recently improved investor sentiment:

1. Monetary Policy Easing: The market’s positive momentum comes on the heels of a reduction in the State Bank of Pakistan’s policy rate. This reduction has lowered borrowing costs and spurred investment in the stock market, further contributing to positive market sentiment.
2. Political Stability: Relative political stability in the country has created a favorable environment for investors. The continued political calm has encouraged more investment in local markets, signaling confidence in the country’s future growth prospects.
3. Inflation and Currency Stability: The market also benefited from lower inflation expectations and a stable rupee, which reassured investors. The disbursements under the IMF program have been a critical factor in bolstering the country’s external account and stabilizing the local currency.
4. External Account Surplus: Pakistan’s growing exports and surplus external account have played a significant role in boosting market sentiment. With an improving trade balance, the confidence in the economy has risen, further supporting the bullish performance of the PSX.

Institutional Buying Drives the Rally

One of the primary contributors to the market rally has been the increased participation of institutional investors. These investors have shown strong interest in the PSX, particularly in high-cap stocks that have posted favorable earnings reports. Some of the top-performing sectors and companies include Fauji Fertilizer, Lucky Cement, Hub Power, Habib Metropolitan Bank, and Millat Tractors, which collectively added a significant 936 points to the index’s gains.

Top Performers of the Day

The KSE-100 index’s historic surge was largely driven by the performance of a few notable companies:

• Fauji Fertilizer Company: With a 3.49% increase in its stock price, Fauji Fertilizer was among the top contributors to the index’s gains.
• Lucky Cement: Posting an impressive 7.92% increase, Lucky Cement emerged as one of the day’s biggest winners.
• Hub Power: Similarly, Hub Power’s stock rose by 3.11%, adding to the overall positive momentum.

On the flip side, there were a few stocks that detracted from the overall index performance:

• Dawood Hercules Corporation: This stock dropped by 2.54%, slightly affecting the market.
• Mehmood Textile Mills: A decline of 7.54% in this company’s stock price made it one of the biggest drags on the index.
• Service Industries: The stock of Service Industries also fell by 2.46%, slightly weighing down the market’s performance.

Stock Market Volume and Trading Activity

While the stock market enjoyed a significant surge in terms of index points, trading volumes saw a slight dip. Trading volumes for the day stood at 956.3 million shares, a decrease compared to the previous day’s tally of 1.24 billion shares. The most actively traded stocks during the day included Cnergyico PK, Pakistan International Bulk Terminal, and The Bank of Punjab.

• Cnergyico PK led the trading volumes with 72 million shares changing hands, closing at Rs7.66.
• Pakistan International Bulk Terminal followed with 62.8 million shares, closing at Rs9.30.
• The Bank of Punjab also saw significant activity, with 45.4 million shares traded, closing at Rs10.96.

In terms of foreign investment, the market saw some outflows, with foreign investors selling shares worth Rs333.1 million, according to the National Clearing Company of Pakistan (NCCP).

CPI Data and Its Impact on the Market

Another important development that contributed to the positive sentiment in the market was the Consumer Price Index (CPI) data for December 2024. CPI rose by 4.1%, marking the lowest inflation rate since April 2018. This improvement in inflation data is significant because it indicates that inflationary pressures in Pakistan are under control, further supporting investor confidence.

Government’s Economic Plan and Export Targets

The government has also released a new five-year economic plan, with the goal of achieving 6% economic growth and boosting exports to $50 billion. This plan is seen as a positive development for the stock market, as it demonstrates a clear roadmap for economic growth and stability.

Analyst Perspectives

Arif Habib Corp MD Ahsan Mehanti pointed out that the market’s rally is supported by robust economic indicators, including lower inflation, positive earnings reports, and improving macroeconomic conditions. He also highlighted that surging exports and the external account surplus were significant catalysts for the market’s bullish performance.

JS Global Analyst Muhammad Hasan Ather noted that the strong performance of leveraged stocks, which are typically more sensitive to interest rate changes, further fueled the market’s surge. He also emphasized that the market’s outlook remains upbeat due to the current macroeconomic environment, which includes low inflation expectations and political stability.

PSX Outlook for the Future

The outlook for the Pakistan Stock Exchange in the coming months looks promising. With monetary easing and a stable political environment, the market is expected to continue its upward trajectory. Investors are also hopeful that the government’s economic policies will lead to sustained growth and that Pakistan’s exports will continue to rise, further contributing to the country’s economic stability.

FAQs

1. What caused the PSX’s surge at the beginning of 2025?

The PSX’s surge was driven by a combination of factors, including institutional buying, monetary policy easing, political stability, and positive inflation and currency data.

2. Which sectors contributed the most to the KSE-100 index gains?

The sectors contributing the most to the KSE-100 index gains included fertilizer, cement, energy, and banking, with companies like Fauji Fertilizer, Lucky Cement, and Hub Power leading the charge.

3. How did the CPI data affect the stock market?

The CPI for December 2024 showed the lowest inflation increase since April 2018, which boosted investor confidence. Low inflation expectations are seen as a positive factor for the economy and the stock market.

4. What are the government’s economic targets for the next five years?

The government’s economic plan targets 6% growth and aims to increase exports to $50 billion by 2029.

5. What is the outlook for the Pakistan Stock Exchange in 2025?

The outlook for PSX remains positive due to favorable economic conditions, including monetary easing, political stability, and growing exports. Continued investor confidence is expected to drive the market forward.