KSE-100 races to 150,000 — too fast, too soon?

On February 24, 2025, I wrote for The Express Tribune that "Pakistan could see its index breach 150,000 in the next 18 to 24 months." Back then, the KSE-100 opened at 112,000 and a 35% return was expected within a year. Today, the index already trades north of 150,000. The big question now is: what does the future look like?

The sharp rally is fundamentally driven, with a re-rating of price-to-earnings from 6x to 8x, closer to long-term averages. This re-rating followed increased taxes on money market funds, International Monetary Fund (IMF) review success, credit rating upgrades, a 1% interest rate cut, improved geopolitical ties after the Indo-Pak war, better US-Pakistan relations, and most importantly, $180 million of net mutual fund inflows.

Too fast, too soon?

Some argue the move is unsustainable. A 10,000-15,000-point correction (7-10%) is very likely once big-ticket investors liquidate $15-20 million in assets. Such a dip would feel painful but is healthy; it allows price discovery, exchange of hands, and a reality check.

Despite the credit rating upgrade, symbolic fall in equity risk premium, and goodwill through US-favored tariffs and investment commitments, foreigners have sold $140 million in the past six months. Yet, additional inflows could return if political stability holds, the MSCI index inclusion expands, global rates fall further, or oil prices decline. Such catalysts could re-rate valuations to 9-10x earnings.

Correction builds resilience

Still, benefits of this rally haven't yet reached the masses. Beyond government-owned pension funds and mutual fund flows, retail entry is largely driven by FOMO through digital account openings. The first real test will come when a 10-20% drop in quality large and mid-caps shakes confidence.

For sustained growth, policies must channel savings into equities. Retail incentives such as tax credits on mutual fund investments, tax relief for IPO investors, and lower listing costs for startups can widen market breadth. Rewarding entrepreneurial listings with a five-year tax holiday or one-time tax credit will encourage new business models and capital formation.

Policy consistency is the key

The Securities and Exchange Commission of Pakistan (SECP) has been proactive in reforms and public engagement, but broader support from ministries is critical. While the International Monetary Fund constraints make fiscal incentives challenging, allocating funds to equity incentives would yield better results than questionable parliamentary schemes.

For investors, the advice remains simple: prepare for short-term volatility, diversify across six to eight stocks, target dividend-yielding and growth-oriented companies, avoid frequent trading on broker tips, and trust seasoned advisers. It is much better to use it as a savings tool than high frequency trading.

On July 14, with the KSE-100 index at 134,000, I predicted 200,000 in three years. That still stands. The hope is for a gradual climb, avoiding booms and busts.

The writer is an independent economic analyst