Moaaz Manzoor

Pakistan’s equity market concluded calendar year 2025 as one of the world’s strongest-performing frontier markets, driven by improving macroeconomic fundamentals, sustained investor confidence and supportive monetary conditions.

The benchmark KSE-100 Index closed CY25 at 174,054 points, posting a robust 51% year-on-year gain. This followed an exceptional 55% rise in CY23 and an 84% surge in CY24, extending the market’s streak of double-digit annual returns to a third consecutive year.

According to a research report by Arif Habib Limited titled “Market Performance: KSE-100 Second-Best Frontier Market in CY25”, available with Wealth Pakistan, Pakistan ranked as the second-best performing frontier market globally in US dollar terms during the year.

The report noted that, on a cumulative basis, the KSE-100 generated a total return of 249% over the past three years — the highest among global markets for the same period. The three-year average annual return stood at 64%, reflecting sustained investor confidence and improving market fundamentals.

Improving macroeconomic conditions continued to support market performance. Corporate earnings remained resilient, with full-year profits projected to grow by around 10–11%, while profitability during the first nine months of CY25 rose by 13.6% year-on-year.

Equities also outperformed most alternative investment avenues. While real estate delivered returns of 17%, Pakistan Investment Bonds and Treasury bills yielded 12% each, Defence Savings Certificates offered 11%, and bank deposits returned around 9%. Gold remained the only competing asset class to outperform equities, recording gains of 65% during the year.

Monetary easing further bolstered investor sentiment. The State Bank of Pakistan reduced the policy rate by a cumulative 250 basis points to 10.5% during CY25, supported by a sharp decline in inflation. Average headline inflation during the first eleven months of the year eased to 3.3%, compared to 13.9% in the same period last year.

External confidence in Pakistan’s economy also strengthened. Progress under the International Monetary Fund programme led to the approval of the first and second reviews of the Extended Fund Facility and the first review of the Resilience and Sustainability Facility, resulting in total disbursements of $3.3 billion.

Reflecting these improvements, credit rating agencies upgraded Pakistan’s outlook, with Moody’s raising the sovereign rating to Caa1 and both Fitch and S&P upgrading it to B- from CCC+. Looking ahead, Arif Habib Limited projects the KSE-100 Index to reach around 208,000 points by December 2026, supported by improving macroeconomic stability and sustained investor confidence.

Credit: INP-WealthPk