Moaaz Manzoor

The Pakistan Stock Exchange’s strong start to 2025 despite minor setbacks reflects a promising investment landscape driven by macroeconomic stability, robust liquidity and optimistic projections, reports WealthPK.

PSX started 2025 with remarkable momentum, driven by a blend of strong macroeconomic indicators and positive market sentiment. Despite some headwinds, the index surged past the 116,843.41 mark during intraday trading before closing at 116,052.68, reflecting a slight dip of 202.44 points or 0.17%.

Speaking with WealthPK, Ali Najib, Head of Equity Sales at Insight Securities, said market sentiment was affected by concerns over deteriorating law and order in Balochistan and the finance minister’s critical remarks on the financial systems of state-owned energy companies, particularly highlighting the significant increase in PSO’s receivables.

"Mutual funds actively channeling capital into the market have created a robust liquidity base, showcasing the untapped potential of PSX," Najib explained. He projected further growth, with the market potentially reaching the 130,000-mark driven by a mix of growth and dividend-yielding portfolios. This optimism is also echoed by Muhammad Waqas Ghani, JS Global’s Deputy Research Head, who, in their report: PSX: Riding the Bull Wave to New Altitudes, predicted the index could climb to 160,000 by year-end, representing a 40% return in 2025.

"The primary driver of this growth, in our view, will be a re-rating of the market from its current PE of 6.0x to the long-term average of 8.0x," he stated while highlighting modest PAT growth across sectors and a 10% contribution from dividend yield to their target. Supporting this bullish outlook, Ghani pointed to favourable macroeconomic conditions. “Interest rates are declining, inflation is subdued, foreign reserves have improved significantly, and the current account posted a cumulative surplus of $944 million during the first five months of FY25.

These indicators, combined with higher remittances and a narrowing trade deficit, signal a stable economic trajectory. Despite an 84% run-up in CY24, we still see room for KSE-100 re-rating as the monetary easing cycle continues with stable macros," Ghani explained. While the outlook remains bright, experts cautioned against complacency. Potential risks such as shifts in international relations or domestic political tensions may derail this momentum. Vigilance and strategic planning will be key to sustaining growth in 2025.

The PSX’s robust start to 2025 reflects a promising investment landscape fuelled by macroeconomic stability and optimistic forecasts. The market offers attractive opportunities with projections of significant returns and re-rating potential. However, investors must stay alert to domestic and international risks to sustain the bullish trend throughout the year.

Credit: INP-WealthPk