Equities rally for second week in a row

Pakistan's equity market extended its bullish momentum for a second consecutive week, with the benchmark KSE-100 index closing at a fresh all-time high of 189,167, posting a 4,068-point gain (+2.2% week-on-week), as improving macro signals and policy expectations reinforced investor confidence.

Market sentiment was underpinned by a combination of easing geopolitical tensions, fresh system liquidity, and growing expectations of further monetary easing, following the return of treasury bill yields to single digits for the first time in nearly four years.

On a day-on-day basis, the PSX started the week with extension of its bullish momentum as the KSE-100 index hit another record high and closed at 187,762, up 2,663 points (+1.44%). The bourse continued its bullish momentum on Tuesday, when the index touched another all-time high at 188,622, up 860 points (+0.46%).

The market witnessed a profit-taking session on Wednesday, with the index closing at 187,003, down 1,589 points (-0.84%). Thursday was a consolidation day, where the PSX closed at 187,688, up 695 points (+0.35%). The stock exchange ended the week by notching another all-time high. The index settled at 189,167, up 1,479 points (+0.79%).

Arif Habib Limited (AHL) noted that the KSE-100 index rallied over the week, closing at 189,167 and registering a gain of 4,068 points (+2.2% WoW). Market sentiment remained positive, supported by easing tensions on the geopolitical side, fresh liquidity, and expectations of rate cut.

T-bill yields hit multi-year lows, with three-month and six-month papers in single digits and 12-month bills just above 10%, amid easing inflation and a dovish policy stance, AHL said. Power generation rose 8.8% YoY to 8,487 GWh in December, the second-highest on record, while 1HFY26 generation increased 1.1% YoY to 67,356 GWh.

Pakistan posted a current account deficit of $244 million in Dec'25, reversing surpluses in Dec'24 and Nov'25, while the 1HFY26 balance swung to a $1.17 billion deficit from a $957 million surplus last year. There was a net FDI outflow of $135 million in Dec'25, with China, Hong Kong, and the UAE contributing 86% of the net inflows, while 1HFY26 inflows fell 43% YoY to $808 million from $1,425 million in the same period of last year.

REER declined to 103.73 in Dec'25 from 104.76 in Nov'25, reflecting a 0.98% MoM decrease, while remaining up 5.81% in FY26 to date and marginally higher by 0.06% in CY25. State Bank-held reserves rose by $15.9 million to $16.1 billion during the week, AHL said.

The Pakistani rupee appreciated slightly against the US dollar, strengthening 0.03% WoW to close at Rs279.86/$. On Thursday, Pak-Qatar General Takaful made history as Pakistan's first IPO of 2026, recording a 21x oversubscription at the PSX.

Syed Danyal Hussain of JS Global stated that the KSE-100 underwent a week of bullish momentum as the index closed at an all-time high of 189,166, increasing by 2.2% WoW. Average daily turnover also improved by 16% WoW.

In a major development, he said, T-bill yields fell back into single digits for the first time in four years at the latest auction. Cut-offs declined by 16-31 basis points across maturities, strengthening market expectations of further easing in the policy rate with the government raising Rs726 billion against the target of Rs700 billion. On the macro front, the IMF revised down Pakistan's FY26 growth forecast to 3.2% from 3.6% in its Oct-2025 World Economic Outlook.

Meanwhile, Pakistan's current account posted a deficit of $244 million in Dec'25, compared to a surplus of $98 million in Nov'25, mainly due to higher imports (+17% YoY) while exports declined by 11% YoY. Cumulatively, the current account deficit for 1HFY26 reached $1.2 billion. Meanwhile, FDI fell by 43% in 1HFY26 to $808 million versus $1.4 billion last year.

In other developments, the government was reportedly seeking billions of dollars in loan at a financing rate of 1-2% from international financing institutions and Saudi Arabia, starting FY27, to refinance power sector debt servicing in order to reduce electricity tariffs, particularly for the industry, Hussain said.