KEY POINTS
- Investor confidence defined the Pakistan Stock Exchange’s performance over the past year.
- A surge in retail participation signals a structural shift in savings and investment behaviour.
- Corporate profitability, easing interest rates, and reform momentum reinforced market optimism.
ISLAMABAD: Pakistan’s stock market has delivered one of its strongest performances in recent history, not merely by scaling new highs but by restoring investor confidence across the board.
Over the past year, confidence, evident in the benchmark numbers, has emerged as the defining force behind the market’s momentum, reflecting broader macroeconomic stabilisation and renewed faith in the reform process.
Speaking on the full-year performance of the Pakistan Stock Exchange (PSX), Khurram Shehzad, Advisor to the Finance Minister, said the market’s rally was underpinned by improving fundamentals, stronger investor participation and growing trust in economic management.
The outcome places Pakistan among the leading global equity markets in terms of returns and sentiment, he argued in his X post and the WhatsApp video message.
Confidence Over Numbers
From January 2025 to mid-December, the PSX delivered returns of around 48 per cent, making it one of the world’s best-performing equity markets during the period.
According to the Advisor, over the past two years, cumulative returns have exceeded 300 per cent — a scale of recovery rarely seen in comparable markets.
But the headline story is not the numbers themselves. It is the confidence behind them.
According to Shehzad, macroeconomic stability, a sustained reform trajectory and endorsement by global institutions have encouraged both local and foreign investors to re-enter the market.
Retail Investors Return
One of the clearest indicators of confidence is the surge in retail participation. Pakistan currently has about 450,000 equity investors.
Of these, roughly 120,000 joined the market in the last 15 to 16 months – a sharp increase by historical standards, according to the Advisor.
Khurram Shehzad believes that this influx of individual investors suggests a shift in public behaviour, with savings increasingly moving towards equity investment.
Such participation, long-limited in Pakistan, is widely viewed as a vote of confidence in market stability and prospects, he added.
Corporate Profits Improve
Investor optimism has been reinforced by improving corporate fundamentals.
Aggregate profitability of listed companies rose 14 per cent during the January-September period compared to the same months last year.
In the July-September quarter alone, profits increased by 9 per cent, quarterly.
Lower interest rates have played a key role. As borrowing costs ease, companies gain breathing space for expansion, capital investment, and balance‑sheet repair.
This has been translated into better earnings visibility and further strengthened investor trust.
Mutual Funds and Market Depth
Another supportive trend is the expansion of mutual fund assets, which have crossed Rs 4 trillion. The equity allocation within these funds has doubled over the past year, increasing from 7 per cent to 14 per cent.
Historically, the average equity exposure of mutual funds has hovered near 27 per cent.
The current gap suggests substantial room for further inflows into the stock market, potentially deepening liquidity and broadening participation.
IPO Pipeline Signals Trust
The strongest signal of confidence is the revival of the primary market, the initial public offering (IPO) by the corporate entities.
As many as 16 new initial public offerings are expected within a year, an occurrence unseen in decades.
This pipeline reflects growing trust among businesses in capital markets as a viable source of financing.
It also expands choice for investors, reinforcing the ecosystem needed for sustainable market growth.
A Market Re-rated
Pakistan’s equity landscape has also undergone a structural re-rating. The number of listed companies valued at over one billion dollars has risen to around 18, from just three in 2022.
This transformation underscores how confidence, once restored, can rapidly reshape market perceptions.
The Bigger Picture
The past year’s market performance signals more than a rally. It marks a rebuilding of confidence — among investors, businesses and policymakers alike.
If reforms remain on track and macroeconomic stability holds, this confidence could prove more durable than any single record high.
In that sense, the true milestone for Pakistan’s stock market is not where the index stands, but the trust that has returned to it.
