Pakistan stocks to remains positive ahead of anticipated rate cut

Pakistan's stock market is expected to maintain its positive momentum in the coming weeks, as investors anticipate a policy rate cut in the upcoming Monetary Policy Committee (MPC) meeting, analysts said.

The anticipated shift of funds from fixed income instruments to equities, spurred by declining fixed income yields, has further bolstered market optimism.

An analyst at AKD Securities expressed confidence in the market's trajectory, highlighting easing inflation as a critical factor.

"The market is expected to sustain its positive trajectory, driven by an anticipated shift of funds from fixed income to equities amid falling fixed income yields," the analyst said.

"Over the medium term, the KSE-100 is anticipated to maintain its upward momentum through calendar year 2025. We project the KSE-100 Index to reach 165,215 points by December 2025, primarily driven by the robust profitability of fertilizer companies, higher sustainable returns on equity (ROEs) of banks, and improving cash flows of exploration and production (E&Ps) companies and oil marketing companies (OMCs), benefiting from falling interest rates."

The upcoming MPC meeting, scheduled for Monday, will be closely monitored, according to an analyst at Arif Habib Ltd., who anticipates a reduction in the policy rate by 50 basis points, bringing it to 11.5%.

"The KSE-100 is currently trading at a price-to-earnings ratio of 6.3x for 2025, compared to its 10-year average of 8.0x, and offers a dividend yield of approximately 8.3% versus its 10-year average of 6.5%," the analyst noted.

The week ending March 7, 2025, concluded on a positive note for the Pakistan Stock Exchange. Investor sentiment remained buoyant, supported by improved domestic liquidity and optimism surrounding discussions on the International Monetary Fund's (IMF) visit for the first review under the $7 billion Extended Fund Facility (EFF).

The KSE-100 Index gained 1.0% week-on-week, closing at 114,399 points. However, average volumes fell by 41% week-on-week to 291 million shares. Foreign selling persisted, with a net outflow of $5.3 million compared to $6.0 million in the previous week.

As the market awaits the MPC's decision and the ongoing IMF mission's progress, analysts remain optimistic about a sustained positive momentum, reflecting a broader sense of optimism in Pakistan's economic outlook.

Currency

Pakistani rupee declined by 30 paisas to PKR 279.97 against the dollar during the outgoing week under pressure of import payments. In the open market, rupee shed 10 paisas to close at PKR 281.40 against the dollar.

Similarly, Saudi Riyal and UAE Dirham also gained against the rupee during the outgoing week.

Rupee lost 20 paisas against UAE Dirham to close at PKR 76.70. Saudi Riyal also gained 15 paisas to close the week at PKR 75 as of March 7, 2025.

Gold

Gold prices also increased during the week. Price of one tola gold surged 2.3% to PKR 300,7000 as of March 7, 2025.

Gold prices rose on Friday, positioning for their strongest weekly performance in six weeks, supported by trade war uncertainties and a weakening dollar.

The safe-haven asset has increased over 2% this week, marking its best performance since the week of January 20, as fluctuating tariff policies under U.S. President Donald Trump fueled market instability. Meanwhile, U.S. gold futures remained steady at $2,926.40.