Karachi: The Pakistan Stock Exchange (PSX) ended the week on a prudent but positive note, because the KSE-100 index displayed a modest gain of 0.5% of week on week (WOW) to close at 119,691 points. While the feeling of investors has remained cautious in the midst of IMF’s talks in neutral and delayed the budget presentation, the market showed resilience, closing the month of May with an impressive gain of 7.5% on a monthly basis (MOM). In the future, market management will depend on budgetary clarity, potential tax reforms and progress in IMF negotiations, factors that may dominate the concentration of investors in the coming weeks.
According to Syed Danyal Hussain, analyst at JS Global, the outgoing week experienced better participation, average daily volumes increasing by 35% WOW to 662 million shares. However, foreign investors continued to leave the market, recording a net output of $ 5.57 million, which was largely offset by local purchases, in particular from common investment funds and insurance companies.
The week started on a nervous note after the IMF concluded its visit without reaching an agreement on key tax objectives, forcing the government to reprogram the federal budget announcement until June 10, 2025. The talks are still underway, focusing on the increase in tax revenue and the reduction in expenses, key conditions to unlock the next IMF tranche.
In a positive development, China has reaffirmed its commitment to refinance $ 3.7 billion in commercial loans by the end of June 2025, providing an external funding discourse. Meanwhile, the State Bank of Pakistan (SBP) continued its market support activities, registering 223 million dollars in net exchange purchases in February 2025, bringing a total purchases to $ 5.9 billion in the first eight months of the 2010.
In the last T-Fill auction, the SBP increased RS772 billion, exceeding its target of 650 billion rupees, the remaining yields that remain stable to all deadlines. In addition, the central bank exchange reserves increased from $ 70 million WOW to $ 11.52 billion, offering a little national currency cushion.
Nabeel Haroon, analyst at Topline Securities, stressed that the KSE-100 index increased by 7.5% MOM in May 2025. This rally was supported by the SBP decision to reduce the policy rate by 100 points to 11%, citing an improvement in inflation perspectives. The approval by the IMF of the first examination under extended fund (EFF), as well as the green light for an additional $ 1.4 billion under the installation of resilience and sustainability (RSF), has further strengthened the feeling of investors.
Macroeconomic indicators have provided mixed signals. IPC inflation for April 2025 was 0.3%, compared to 0.7% in March, reporting inflationary pressure.
Commercial data, however, has raised certain concerns. The trade deficit widened to 3.39 billion dollars in April, up 55%, the highest in three years. However, the current account has managed an surplus of $ 12 million for the month, helped by a significant increase in funding, which reached $ 3.2 billion (up 13% in annual shift). Cumulatively, the surplus of the current account amounted to $ 1.88 billion for the first 10 months of fiscal year 25.
The volume and value daily negotiated daily for the month were reported with 566 million shares and 28 billion rupees, respectively, indicating the improvement of liquidity conditions and the growing appetite of investors.
While investors are looking to the future, the clarity of budgetary measures, tax policies and progress with the IMF will be essential to shape the momentum in the short term.
