PSX set to reach new highs amid corporate momentum and U.S. trade talks

The Pakistan Stock Exchange is likely to reach new highs next week on the back of corporate announcements, ongoing negotiations with the U.S. on a tariff deal, the impending monetary policy announcement, and fresh liquidity chasing blue chip stocks.

The benchmark KSE-100 index surged from 125,627 points to an all-time high of 131,949 points, marking a weekly gain of 7,570 points or 6.1%. The rally was supported by broad-based buying across sectors, underpinned by stabilizing macroeconomic indicators.

Foreign selling witnessed this week amounted to $15.33 million compared to a net sell of $11.78 million last week. Major selling was witnessed in commercial banks, amounting to $4.51 million.

On the local front, mutual funds bought shares worth $22.14 million and companies $12.24 million.

Average volumes arrived at 967.3 million shares, up by 31.4% compared with the previous week while the average value traded settled at $145.7 million, up 31.9% from last week.

Improving indicators

Salman Ahmed, head of retail investors at Aba Ali Habib, said key economic indicators have shown improvement, and hence, the rally would continue next week.

A number of key developments would keep fundamentals intact, he said. These include inflation numbers released this week, which were in line with expectations and therefore, likely to convince the central bank to cut the interest by 100bps.

The developments also included oil & cement sales, a reduction in trade deficit, ongoing talks with the U.S., and upcoming financial results.

He added that the cement, auto, and banking sectors performed well in the last quarter.

Ahmed said investor sentiment strengthened after the ruling party got a two thirds majority in the National Assembly, signaling political stability in the country.

Low returns on fixed-income instruments

Ali Nawaz, CEO of Chase Securities, said that the ongoing trend of relatively low returns on fixed income instruments is expected to support the equity market further, as yield-seeking investors continue reallocating capital into stocks.

This liquidity rotation has already played a significant role in the recent rally, and with no near-term reversal in interest rate trends expected, the momentum is likely to persist.

"With the earnings season kicking off and liquidity remaining abundant due to unattractive fixed income returns, the PSX is expected to maintain its upward trajectory in the coming week,” he said.

Sectors with upcoming results and high dividend yields may see increased investor interest, while any positive macro developments or policy clarity could further fuel the rally.

Profit-taking may surface

Equity analyst Jibran Sarfraz said while the market would reach new highs in the coming week, profit-taking may surface. This would be healthy for the market since the trend shows the market surges higher after every dip, he noted.

In the last six sessions, the KSE-100 index has gone up by nearly 10,000 points with the banking, oil and fertilizer sectors as major influencers.

Sarfraz said investors were unlikely to move to other sectors, which had less of a role in the rally.

"We expect the market to see some fresh liquidity from the start of the new fiscal year from depositors of banks and National Savings Schemes,” the analyst said.

An analyst from Spectrum Securities said that the next major event for local and international equity markets will be the July 9 deadline when the pause on the tariffs announced by President Trump will be removed.

It has been reported that Trump will issue tariff letters on July 4, which will range between 10%-20% and 60%-70%, and the levies will take effect from August 1.

Next high

Global equities closed lower this week ahead of the tariff deadline.

A delegation from Pakistan has reached Washington to finalize the trade deal with the U.S. Officials are hoping to reach a deal this week to remove any uncertainty for exporters and investors.

If the country manages to finalize the trade deal as reported, it will have a broadly positive impact on the market next week.

Companies will start reporting their quarterly and half yearly earnings (June-end) starting with the UBL board meeting on July 11.

The majority of financial results will be announced later in July and August.

With the index already trading at record levels, next levels on the upside are 134,000 and 138,000 points. Support levels are 129,000 and 126,000 points, he said.

An analyst from Arif Habib Ltd said the optimism witnessed this week is expected to carry into the coming sessions, with the market poised to explore new highs.

While intermittent spells of profit-taking and cautious sentiment may surface, the broader trend remains upward. Investors continue to capitalize on attractive valuations, he added.