PSX volatile as geopolitical risks weigh on sentiment
Pakistan Stock Exchange (PSX) remained volatile throughout the week ended Friday 25, 2025, as escalating geopolitical tensions post the Pahalgam attack in Indian Occupied Kashmir and India’s subsequent threats to revoke the Indus Water Treaty with Pakistan further undermined investor sentiment. The KSE-100 index closed the week at 115,469 points, losing 1,846 points, down 1.57%WoW.
Positive news stemmed from the IMF’s World Economic Outlook for April 2025, lowering Pakistan’s inflation forecast for FY25 to 5.1%YoY and 7.7%YoY for FY26. On the flip side, growth projection for FY25 was revised slightly downward to 2.7%, from 2.8% previously.
The news reports indicate that authorities have reached a preliminary agreement with two foreign commercial banks for a US$1 billion loan facility, at interest rate of 7.6%.
Finance Minister met with representatives from credit rating agency Moody’s in an effort to improve Pakistan’s credit rating, following a recent upgrade by Fitch.
PKR depreciated 0.09%WoW against the greenback.
Foreign exchange reserves held by State Bank of Pakistan (SBP) decreased by US$367 million to US$10.2 billion as of April 18, 2025.
Other major news flow during the week included: 1) Finance Minister met with IMF chief, 2) Government urged to fully deregulate wheat supply chain, 3) Cabinet recommended to abolish FED on property transfer, 4) Kuwait announced to join Pakistan offshore bids and 5) Pakistan missed wheat production target.
Vanaspati & Allied Industries, Synthetic & Rayon, and Textile Spinning were amongst the top performers, while Refinery, Jute, and Transport were amongst the laggards.
Major selling was recorded by Banks/ DFI with a net sell of US$4.0 million. Organizations and Foreigners absorbed most of the selling with a net buy of US$6.9.
Top performing scrips of the week were: NATF, FCEPL, MUREB, ATLH, and SNGP, while laggards included: BOP, PIBTL, EPCL, AGL, and HUMNL.
According to Pakistan’s leading brokerage house, AKD Securities lower oil prices and favorable standing among exporting peers amid reciprocal tariffs will support Pakistan’s economy and strengthen the outlook for a return to single-digit interest rates in CY25.
The benchmark index is anticipated to sustain its upward trajectory, primarily driven by strong earnings in Fertilizers, sustained ROEs in Banks, and improving cash flows of E&Ps and OMCs, benefiting from falling interest rates and economic stability. Top pick of the brokerage house includes, OGDC, PPL, PSO, FFC, ENGROH, MEBL, MCB, HBL, FCCL, INDU, ILP and SYS.
Pakistan has reported highest ever monthly Current Account Surplus of US$1.2 billion for March 2025, taking 9MFY25 surplus to US$1.9 billion as compared to a deficit of US$1.7 billion. Topline Securities expects FY25 current account to remain in surplus, to US$1.24 billion. The monthly surplus is all time high as previously highest reported figure was US$981 million in August 2012, thanks to the highest ever remittances of US$4.1 billion in March 2025.
The remittances witnessed growth of 37%YoY and 30%MoM due to the Eid/ Ramadan. During 9MFY25, remittances increased by 33% to US$28bn. State Bank of Pakistan (SBP) has revised its remittances target to US$38 billion for FY25 from an earlier target of US$36 billion. Remittances are increasing owing to higher incentive offered to financial institutions to facilitate remittances through formal channels, increase in manpower exports, and reduced differential of exchange between official/ unofficial market which encourages routing through formal channel.
Services deficit was reported at US$226 million, up 14%YoY but down 13%MoM. Primary deficit was recorded at US$657 million, up 11%YoY and 15%MoM also.
Pakistan’s export of textiles and clothing was reported at US$1.4 billion for March 2025, up 10%YoY and 1%MoM. This was the 8th consecutive month a YoY rise in textile exports was recorded, showing positive trajectory for textile in FY25. The 10%YoY increase was mainly driven by a 13%YoY growth in the value-added segment. On a MoM basis, both basic textiles and the value-added Segment recorded a 1% rise. In PKR terms, Pakistan’s textile exports were reported at PKR401 billion, up 11%YoY and 1%MoM.
The value-added segment recorded a 13%YoY and 1%MoM increase. The segment has been a focus for both the government and companies, contributing to the recent growth. According to the Federal Minister, significantly more emphasis and improvement are required to make it competitive in the international market.
Under the value-added segment, Bedwear was the main contributor to the YoY growth, up 19%YoY and 2%MoM to US$256 million during March 2025. Knitwear/ Readymade Garments/ Towels were recorded at US$386 million, US$321 million and US$89 million respectively.
Basic textiles witnessed decline of 2%YoY, but were up 1%MoM to US$205 million for March 2025. Major decline came in cotton cloth which was down 10%YoY and 2%MoM to US$146 million in March 2025.
During 9MFY25, Pakistan recorded textile exports of US$13.6 billion, up 9%YoY. Basic textiles were down 13%YoY, whereas value-added exports rose by 16%YoY, with readymade garments contributing a 19%YoY rise.
Going forward, analysts believe, the potential imposition of a 29% tariff on Pakistani textiles by the United States may present a challenge to companies exporting to USA. Still, they believe FY25 exports to rise close to US$20 billion as compared to less than US$17 billion for FY24.
Topline Securities expects earnings of its Fertilizer universe to decrease by 32%YoY and 55% QoQ for 1Q2025 mainly due decline in Urea and DAP offtakes amidst weak farm economics, and water shortage.
Urea offtake is expected to decrease by 40%YoY and 45%QoQ to 1.1 million tons in 1Q2025. Similarly, DAP offtakes are expected to decrease by 50%YoY and 79%QoQ to 144,000 tons in 1Q2025.
Average Urea prices during 1Q2025 declined by 4%YoY and 1%QoQ to PKR4,520 per bag as Engro Fertilizers announced a discount of PKR100/ bag during the quarter to capture the market share. Similarly, DAP prices have also decreased by 4%YoY and up 1%QoQ to around PRR12,038 per bag, respectively.
Gross margins of the sector are expected to settle at 32.74% in 1Q2025, as compared to 24.21% in 1Q2024 and 28.14% in 4Q2024. The increase in gross margins is due to absence of imported urea and one-off adjustments made during the merger of FFBL with FFC.Finance cost of the sector during 1Q2025 is expected to increase by 16%YoY, but down 18%QoQ to PKR3.1 billion primarily due to increase in borrowings by the sector.
Effective tax rate of the sector is expected to decline to 39% in 1Q2025, from 41% in 1Q2024.
In absolute term, tax expense of the sector is expected to be recorded at PKR9.7 billion for 1Q2025.