PSX rings in New Year on high amid optimism for economic stability

• KSE-100 Index rose 1,881.18 points, closing at 117,008.08.
• Investor optimism surged, driven by economic reforms.
• PM launched 'Uraan Pakistan', targeting $10 billion annual FDI.

The capital market opened the year on a positive note, supported by renewed optimism surrounding economic reforms and strategic initiatives.

The Pakistan Stock Exchange's (PSX) benchmark KSE-100 Index surged 1,881.18 points, or 1.63%, to close at 117,008.08, marking a strong start to the year. The index reached an intraday high of 117,341.03 and a low of 114,719.89 during a session marked by sustained investor interest and confidence.

“As the new year starts, fresh allocations are driving the markets up," said Ismail Iqbal Securities Chief Executive Officer Ahfaz Mustafa. "A better-than-expected tax collection number is also indicating that a mini-budget or further taxation may not be required,” he added.

The market’s upward momentum comes on the back of improving economic fundamentals and optimism surrounding the government’s economic reforms. Clarity on key taxation policies, better-than-expected revenue collection, and a stabilising inflationary environment have bolstered investor confidence.

Adding to the optimism, Prime Minister Shehbaz Sharif unveiled “Uraan Pakistan,” a comprehensive five-year National Economic Transformation plan designed to rejuvenate the country's economy. The initiative, which focuses on export-led growth through the 5Es – exports, e-Pakistan, environment, energy, equity, and empowerment – seeks to attract $10 billion annually in foreign investment while fostering local investment.

Launching the logo, website, and book on the Uraan Pakistan initiative, Prime Minister Shehbaz outlined ambitious goals, including achieving a sustainable GDP growth rate of 6% by 2028, creating one million jobs annually, and securing $10 billion in annual foreign investment, while also fostering a conducive environment to stimulate local investment. The plan prioritises the IT, agriculture, exports, and mining sectors as pillars for sustainable growth.

Emphasising the need for political harmony, PM Shehbaz called for a Charter of Economy among political parties, highlighting that economic stability is intertwined with political stability. “Privatisation and outsourcing are vital to save huge losses, for which political dialogue is utmost necessary,” he said.

Meanwhile, the Federal Board of Revenue (FBR) announced a tax shortfall of Rs386 billion for the first half of the current fiscal year (July–December), with total revenue collection amounting to Rs5,623 billion. This fell short of the IMF’s target of Rs6,009 billion. Despite the shortfall, the FBR managed to generate Rs72 billion through new taxation on the banking sector, raising the tax rate from 39% to 44%.

Finance Minister Muhammad Aurangzeb, on Sunday, projected that inflation December could settle between 4-5%. He also hinted that single-digit interest rates were within reach, with the current policy rate already reduced to 13%.

The PSX has seen strong performance throughout the year, with the KSE-100 Index posting an 84% return in 2024, its highest since 2002. The market recorded a third-largest single-day rally on Monday, gaining 3,907.82 points to close at 115,258.99. 

Despite volatility earlier in the month, the equities market has demonstrated resilience, supported by robust economic indicators, including a decade-high current account surplus of $729 million in November.

Foreign direct investment (FDI) surged by 31% year-on-year during the first five months of FY2024-25, reflecting international confidence in Pakistan’s economic recovery. Exports grew 12.57% to $13.69 billion during the same period, while imports declined by 16.91%, contributing to an improving trade balance.

Despite external debt repayments that reduced State Bank of Pakistan (SBP) reserves by $228 million to $11.9 billion, analysts remain optimistic about Pakistan’s economic trajectory. The PSX, ranked the second-best-performing stock market globally in 2024, is positioned for sustained growth into 2025, driven by macroeconomic reforms, political stability, and favourable monetary policies.

On the last trading session of 2024, stocks stumbled a little and closed with a slight decline of 132 points amid year-end institutional profit-taking. The KSE-100 index decreased by 0.11% to 115,126.9 points against 115,259 points recorded in the previous session.