Pakistan stocks hold firm on strong fundamentals amid trade uncertainty

Any recovery in Pakistan's equity market would depend on how quickly the trade dispute subsides and signals of a recessionary trend fade. While there has been a pause, the trade war between the U.S. and China continues to cast a shadow on a sustained rally.

Jibran Sarfraz, an equities expert, said that the stock market in the upcoming week would gain guidance from the international buzzwords of the day—"trade war," "reciprocal approach," and "retaliatory duties" imposed by the USA and China.

He noted that although there has been a 90-day pause by the USA in imposing further tariffs on China, any move toward resolution would help re-rate global stock markets.

Jibran explained that the domestic stock market experienced relatively less impact compared to its peers as the fundamentals remain strong.

He highlighted that inflation figures have hit a 60-year low, interest rates are on the lower side, and reductions in electricity tariffs and crude oil prices have been beneficial for industries like cement, textile, and steel.

Ali Nawaz, CEO of Chase Securities, remarked that an escalating trade war benefits no country. However, as multiple nations have approached the U.S. to negotiate tariffs, there is optimism that global tensions will ease.

"This is likely to support the stabilization of global markets, which in turn bodes well for a recovery in the Pakistan Stock Exchange," he added.

"Locally, key triggers for a positive market outlook include the upcoming corporate results season, expectations of an interest rate cut, and a recent reduction in petrol prices."

Salman Ahmad, Head of Retail Investors at Aba Ali Habib, said that while market fundamentals are strong, much depends on how the trade war concludes and when the USA and China reach an early resolution.

"One thing is certain: the imposition of heavy duties on China and other countries has made our goods slightly cheaper, which might help us gain an edge in global trade," he noted.

He added that the duties wouldn't significantly impact trade with the USA, as Pakistan enjoys a trade surplus of over $3.5 billion. Salman emphasized that the 90-day pause provides some relief, but any positive development would strengthen the market trend.

Salman also mentioned that market sentiment has been inherently strong due to record-low inflation, a drop in crude oil prices that is likely to soften inflation further, and anticipated likely monetary easing. Additionally, the IMF's nod for a $7 billion package and a climate-resilient fund all bode well for the market.

He noted that the preceding week was highly volatile, with the index experiencing a historic single-day decline of 8,500 points, followed by a partial recovery.

However, the market remained erratic due to the ongoing trade war and continued tensions between China and the USA, with both nations imposing tariffs on each other, sending shockwaves through global markets and lowering share prices.

An analyst at Arif Habib Ltd. stated that the market is expected to be positive in the upcoming week, as the US has paused reciprocal tariffs on all countries (except China) for 90 days.

Coupled with the ongoing decline in commodity prices, this provides some respite for the index. Furthermore, the upcoming results season is expected to put certain stocks in the limelight.

An analyst at AKD Securities commented that lower oil prices and Pakistan's favorable standing among exporting peers, amid reciprocal tariffs, would support the economy and improve the outlook for a return to single-digit interest rates in CY25.

The KSE-100 Index is anticipated to sustain its upward trajectory, driven primarily by strong earnings in fertilizers, consistent ROEs in banks, and improving cash flows for E&Ps and OMCs, benefiting from falling interest rates and overall economic stability.

The KSE-100 Index closed at 114,853 points, down 3.3% (or 3,988 points) during the week ending April 11, 2025. Foreign investor activity witnessed net selling of $9.9 million this week compared to a net buy of $7.4 million last week.

Currency:

The rupee experienced some volatility during the week due to external payment pressures, closing almost flat at 280.47 against the dollar compared with 280.46 the previous week.

Gold:

Gold prices in Pakistan surged by 4.09% during the week ending April 11, 2025, to PKR 338,800 per tola. Gold prices in global markets rose by 1.6% over the week, increasing from $3,030 per ounce to $3,236 per ounce.

The fluctuation is attributed to central bank purchases, geopolitical tensions, and the impact of tariffs imposed by the Trump administration.

Recent trends highlight significant volatility in gold prices, driven by macro-level uncertainties and the intensifying trade war between the US and China, exacerbated by tariff escalations.