Hold on tight! Pakistan's stock market just finished a week of wild ups and downs, leaving investors scratching their heads. The KSE-100 index barely budged, ending almost exactly where it started. But don't let the calm fool you – there's a lot brewing beneath the surface.
The KSE-100 index at the Pakistan Stock Exchange (PSX) managed a marginal climb of 168 points, settling at 162,103 by the close of trading on Friday. This slight gain was fueled by renewed optimism surrounding the recovery of the large-scale manufacturing (LSM) sector and positive news specific to certain prominent companies. These "blue chips," as they're often called, saw their stock prices rise due to company-specific factors.
Let's rewind and break down the week day by day: The week began with investors taking some profits off the table. After some back-and-forth trading, the index closed down 248 points (0.15%) at 161,987. Tuesday saw more of the same, with the KSE-100 dipping further into the red, falling 752 points (0.47%) to 160,935. But here's where it gets interesting... The bulls charged back on Wednesday, with the market staging a strong recovery, adding a whopping 1,291 points (0.80%) to close at 162,226. Thursday continued the upward trend, with another 711-point (0.44%) gain, bringing the index to 162,937. And this is the part most people miss... As anticipated by many analysts, the market cooled off on Friday, slipping 834 points (0.51%) to finish at 162,103 ahead of the futures rollover week. This "rollover week" refers to the period when investors adjust their positions in futures contracts, which can often lead to increased volatility.
Arif Habib Limited (AHL) pointed out in their weekly report that the KSE-100's overall gain of 168 points was driven by the recovering LSM sector and positive developments within specific industries. For example, Fauji Fertiliser Company (FFC) saw its stock rise after being included in the KMI-30 index. Pakistan Petroleum Limited (PPL) attracted investor interest due to new offshore exploration activities. And Pioneer Cement experienced a rally amid speculation about potential mergers and acquisitions. It is worth noting that mergers can be controversial and potentially damaging to market competition.
During the week, Pakistan reported a trade deficit of $3.28 billion for October 2025. Zooming out, the cumulative trade deficit for the first four months of fiscal year 2026 (4MFY26) widened by a significant 38.9% year-on-year (YoY), reaching $12.6 billion. On a brighter note, the LSM output in September 2025 showed a growth of 2.7% YoY, and a 2% increase month-on-month (MoM).
Technology exports also hit a record high of $386 million in October 2025, representing a 17% YoY increase (and a 5% MoM increase). Now, get this: Tech exports now account for a whopping 47% of Pakistan's total services exports, the highest monthly level ever recorded!
The Real Effective Exchange Rate (REER), a measure of a currency's value against a basket of other currencies, rose to 103.95 in October 2025. This represents a 2.18% MoM increase and a 6.04% increase for FY26 to date. Net foreign direct investment (FDI) stood at $179 million in October 2025, but overall FDI for 4MFY26 was down 26% YoY to $748 million. Auto financing, a key indicator of consumer confidence, rose 33.7% YoY to Rs315 billion in October 2025, up 3.5% MoM.
Looking at the energy sector, crude oil imports rose 28.5% YoY to 691,479 tons in October 2025, while petroleum product imports increased 30.6% YoY. Liquefied natural gas (LNG) imports fell 11% YoY, but furnace oil exports surged to 214,000 tons. Power generation fell 3.7% YoY to 9,886 gigawatt hours (GWh) in October 2025, with 4MFY26 production remaining stable at 50,819 GWh. Interestingly, power generation costs dropped 6% YoY to Rs8.51 per kilowatt hour, mainly due to lower Brent crude oil prices.
In the banking sector, deposits rose 13% YoY to Rs35.2 trillion in October 2025, while advances (loans) fell 3.6% YoY to Rs13.3 trillion. This resulted in an advance-to-deposit ratio of 37.8% (-650 basis points YoY) and an investment-to-deposit ratio of 104% (+1,098 basis points).
Finally, profit and dividend repatriation (money sent out of the country) in October 2025 totaled $385.6 million, down 6.8% YoY but up a significant 142.6% MoM. For 4MFY26, repatriation rose 39% YoY to $1,137.3 million, according to AHL.
Wadee Zaman of JS Global highlighted that the KSE-100 essentially moved sideways during the week, closing flat at 162,103 points. However, the average daily trading volume increased by 37% week-on-week, suggesting increased investor activity, even if it didn't translate into significant price movement.
On the macroeconomic front, Zaman noted that Pakistan recorded a current account deficit of $112 million in October 2025, bringing the cumulative 4MFY26 deficit to $733 million. This increase was primarily driven by a widening trade deficit, which surged 39% YoY to $12.7 billion during 4MFY26.
Adding to the mix, Pakistan's dollar bonds have rallied by an impressive 24.5% this year, making them among the top-performing bonds in the region. The government is also planning to issue dollar bonds next year, after a nearly five-year pause. In another positive development, Pakistan fulfilled a condition set by the International Monetary Fund (IMF) by releasing the Governance and Corruption Diagnostics Report ahead of the IMF's executive board meeting to approve a $1.2 billion tranche of funding.
Zaman also echoed the sentiment regarding the LSM sector, stating that output rose 2.69% YoY in September 2025, bringing the cumulative growth for the first quarter of fiscal year 2026 (1QFY26) to 4.08%.
So, what does it all mean? The PSX is sending mixed signals. While some sectors show promise, the widening trade deficit remains a concern. The government's efforts to secure IMF funding and attract foreign investment are crucial, but the market's reaction in the coming weeks will depend on a variety of factors, including global economic conditions and domestic policy decisions.
What are your thoughts on these developments? Do you believe the LSM sector's recovery is sustainable? Are you optimistic about Pakistan's economic outlook? Share your opinions and predictions in the comments below!
