Buying CY26, macros push PSX even higher

Pakistan’s equity market opened the new year on a strong footing as the benchmark KSE-100 extended its upward momentum for a second week, climbing 5,375 points, or 3% week-on-week (WoW), to close at 184,410.

The rally was fueled by renewed buying in heavyweight stocks amid improved market participation, supportive macro indicators and positive company-specific developments, while softening yields in the latest bill auction and strong remittances further boosted investor sentiment. On a daily basis, the upward momentum in the Pakistan Stock Exchange (PSX) continued unabated on Monday as the KSE-100 index surged beyond 182k to close at 182,408, up 3,373 points (+1.88%).

And on Tuesday, the market’s rise continued, when the index gained 2,654 points (+1.45%) to close at 185,602. The strong and sustained uptrend remained intact on Wednesday, with the stock holding its full strength and closing at a new all-time high of 186,518. In the first five sessions of CY26, the index added a whopping 12,464 points (+7.2%).

However, after the sharp rally, the PSX witnessed the first speculative session on Thursday, where the index closed at 185,543, down 976 points (-0.52%). On Friday, the PSX took a breather and the KSE-100 remained volatile, moving in both directions before closing at 184,410, down 1,133 points (-0.61%). Despite the decline, year-to-date CY26 earnings remained strong at 5.95%, equivalent to a gain of 10,356 points.

Arif Habib Limited’s (AHL) weekly report noted that the KSE-100 index climbed from 179,035 points last week to 184,410 last week, gaining 5,375 points (+3%), supported by the rally of heavyweight stocks due to new markets and positive new companies, new markets and new companies, special news and new year news, gaining 5,375 points (+3%).

Among the economic developments, the government through government bond auction raised Rs 979.3 billion against the target of Rs 850 billion. Yields fell across trends by 28.6 to 33.8 basis points. Participation remained strong at Rs 2,554.6 billion.

Workers’ remittances reached $3.6 billion in December 25, up 17% year-on-year (y-o-y). Cumulatively, 1HFY26 remittances were $19.7 billion, up 11% YoY.

AHL said the tariff revision, following the shift from fiscal year to calendar year, was likely to reduce the power purchase price by Rs 0.51 per kilowatt hour (kWh) in CY26 over FY26. Cotton arrivals at mills remained flat at the end of December 25. In Punjab, cotton arrivals were down 4% in the year 25, while arrivals in Sindh improved 4% y-o-y. However, total production is estimated at 6.8 million bales in 2026, representing a significant shortfall of 33% against forecasts.

Meanwhile, central government debt stood at Rs77.5 trillion on November 25 compared to Rs70.4 trillion on November 24, up 10.2% year-on-year and 0.7% month-on-month, AHL added.

Syed Danyal Hussain of JS Global, in his report, said the benchmark KSE-100 index extended its uptrend in the second week of the year to close at 184,410, up 3% WoW. The rally was largely led by banks, which contributed 57% to the index’s gains, while cement stocks (8%) and auto stocks (5%) provided limited support. Market participation improved significantly, with average daily trading volume increasing by 25% WoW.

At the macro level, he said, Pakistan recorded monthly remittances of $3.6 billion in December 25, reflecting a 17% year-on-year increase. Meanwhile, total public debt fell by Rs345 billion to Rs77.5 trillion in 5MFY26, largely supported by State Bank’s transfer of profits to the government.

In policy developments, the government has been exploring options to seek easing from the IMF ahead of Budget 27, with key proposals including a gradual reduction in surcharge over the next four years and lower energy tariffs to boost competitiveness.

Separately, the gas sector’s revolving debt stood at Rs 3.2 trillion, mainly due to a sharp rise in late payment surcharges (Rs 1.45 trillion). In the line auction, the government raised Rs 979 billion against a target of Rs 850 billion, with yields declining by 29-33 basis points at different times. SBP’s reserves increased by $141 million to $16 billion.