KARACHI: The outlook for the coming week remains positive, with momentum in the KSE-100 expected to continue on the back of improving macro stability, a supportive monetary environment and rising investor confidence, according to AKD Research.
The successful third tranche disbursement under the IMF’s Extended Fund Facility and Resilience and Sustainability Facility, falling fixed income yields and recent upgrades by global rating agencies continue to underpin sentiment.
Expectations of improved foreign portfolio and direct investment flows, driven by strengthening ties with the US and Saudi Arabia, further support the market view.
With limited alternative investment avenues and attractive valuations, local equities remain compelling, as the KSE-100 trades at a price-to-earnings multiple of 8x and offers a dividend yield of 6.5 per cent.
During the week under review, the market experienced bouts of volatility due to year-end portfolio rebalancing, yet the broader bullish trend remained intact. Investor optimism, fuelled by the recent 50 basis points (bps) policy rate cut announced by the Monetary Policy Committee (MPC), helped the KSE-100 index post a weekly gain of 996 points to close at a record high of 172,401 points, reflecting an increase of 0.6 per cent week-on-week.
Market participation eased, however, with average daily traded volume declining 3.5 per cent week-on-week (WoW) to 1.1 billion shares from 1.2 billion shares previously.
On the policy front, the government achieved a major milestone by completing the privatisation of Pakistan International Airlines, with a consortium led by the Arif Habib Group acquiring a 75 per cent stake.
Fixed income markets responded positively to monetary easing, as treasury bill yields fell by 36bps, 50bps, 52bps and 78bps across one-month, three-month, six-month and 12-month tenors at the first auction following the rate cut.
External buffers also improved modestly, with State Bank of Pakistan foreign exchange reserves rising by $16 million WoW to $15.9 billion as of December 19, while the Pakistani rupee appreciated slightly by 0.03 per cent against the US dollar to close at 280.17 per dollar.
Key news flow during the week included Pakistan’s intention to debut the Panda bond in January, the receipt of $700 million in World Bank financing for tax reforms, a review by the Asian Development Bank of progress on the ML-I rail upgradation project, efforts to enhance chemical trade with South Korea, and the conferment of Saudi Arabia’s highest honour on Chief of Army Staff General Asim Munir.
Sector-wise, property, technology, modarabas, paper and board, and fertiliser stocks led gains, rising 11.3 per cent, 3.4 per cent, 2.0 per cent, 1.5 per cent and 1.4 per cent WoW, respectively. In contrast, investment banks, woollen, textile weaving, vanaspati and leasing sectors lagged, declining between 2.5 per cent and 9.2 per cent.
Flow-wise, mutual funds emerged as the largest net buyers with purchases worth US$4.4 million, while insurance companies recorded net selling of $5 million. Among individual stocks, JVDC, PTC, KOHC, BOP and MEHT outperformed, while YOUW, RMPL, UNITY, SSGC and GADT underperformed.
Syed Danyal Hussain, an analyst at JS Research, noted that the index’s record close came despite a sharp fall in turnover, with sentiment supported by the landmark PIA privatisation valued at Rs135 billion and steady external financing, including World Bank and Asian Development Bank support. He added that private sector lending had reached Rs1.5 trillion year-to-date in FY26, boosting liquidity, while treasury bill yields declined sharply across tenors.
Separately, Nabeel Haroon, an analyst at Topline Securities, attributed the weekly gain to the PIA privatisation and the recent 50bps policy rate cut to 10.5 per cent.
