Stock Market Volatility Amid Floods and Political Unrest

Karachi: The stock market experienced notable fluctuations this week, primarily driven by the recent floods in Khyber Pakhtunkhwa and Punjab, as well as increasing political tensions. The KSE-100 index saw a decline of 870 points, or 0.59%, closing at 148,617 points. However, Friday’s session brought a partial recovery, with the index rebounding by 1,274 points, spurred by strong corporate earnings, especially within the cement sector.

Market participation showed an upward trend, with average daily trading volumes increasing by 13.7% to 899 million shares from 790 million shares the previous week. In macroeconomic developments, the State Bank of Pakistan’s net foreign exchange interventions amounted to $7.2 billion in the fiscal year up to May. The central bank’s profit for the fiscal year fell by 27% to PKR 2.5 trillion, attributed to a decline in interest rates. Nevertheless, the dividend payout to the federal government surged 2.8 times to PKR 2.7 trillion.

Additionally, the State Bank’s gold reserves rose to $6.8 billion, marking a 41% increase for the fiscal year. Foreign exchange reserves increased by $18 million, ending the week at $14.3 billion as of August 22. On the currency front, the Pakistani Rupee appreciated slightly by 0.05% against the U.S. dollar, closing at PKR 281.77.

Among other significant developments, Pakistan secured a 19% tariff following negotiations with the United States. The State Bank raised the housing finance limit for microfinance borrowers to PKR 5 million. ExxonMobil showed interest in returning for offshore ventures, while Pakistan prepared to enter talks with Qatar regarding LNG supplies. The budget deficit for the fiscal year dropped to 5.4% from 6.8% the previous year.

Sector-wise performance noted Jute, Property, Cement, Cable and Electrical Goods, and Glass and Ceramics as top performers, with weekly gains ranging from 3.4% to 4.9%. Conversely, Woollen, Leather and Tanneries, Textile Spinning, Insurance, and Pharmaceuticals were the worst performers, experiencing declines between 3.2% and 4.5%.

In terms of capital flows, significant net selling was recorded by Foreigners and Banks/DFIs, while Mutual Funds and Companies were the primary buyers. Notably, PIBTL, SAZEW, DGKC, UPFL, and PAEL were among the week’s top-performing companies, whereas AGP, BAHL, FABL, SRVI, and AIRLINK lagged.

Looking ahead, the market is expected to maintain a positive outlook, with developments in circular debt and forthcoming corporate results likely influencing the trajectory. Analysts anticipate the KSE-100 index to reach 165,215 points by December 2025, driven by robust earnings in fertilizers, stable returns on equity in banks, and improving cash flows in exploration and production sectors. Key picks for investors include OGDC, PPL, PSO, FFC, ENGROH, MCB, INDU, and SYS.