The Pakistan Stock Exchange (PSX) extended its bullish run in the shortened four-day trading week, with the benchmark KSE-100 index hitting an all-time high of 147,005 points before closing at 146,492, up 0.8% week-on-week. This rally was fueled by robust corporate earnings, Moody's upgrade of Pakistan's sovereign rating to Caa1, and optimism about the declining circular debt in the power sector. However, profit-taking capped gains by the week's end.

The bulls marched towards 150k on Monday, with the KSE-100 index breaching 146k and ending the day at 146,930, up 1,547 points, in anticipation of a Pakistan-US trade deal. Tuesday saw a consolidation day, with the KSE-100 floating in both directions and ultimately closing at 147,005 (+76 points) as investors engaged in some switching-cum-profit-taking. On Wednesday, profit-booking around the 148k mark pushed the index down to close at 146,529 (-476 points). After the Independence Day break, the PSX ended the last session of the week on a flat note, settling at 146,492 (-38 points) as investors largely squared off weekly positions.

Arif Habib Limited (AHL) noted in its weekly review that the KSE-100 index maintained its upward trajectory. The rally was fueled by healthy corporate earnings during the ongoing results season. Furthermore, Moody's upgraded Pakistan's sovereign rating to Caa1 from Caa2, citing improving external buffers, fiscal consolidation, and reform progress under the IMF program. Additionally, circular debt in the power sector declined to Rs1,614 billion as of June 2025. In July, the auto industry recorded sales of 11,034 units, down 49% month-on-month but up 28% year-on-year. Oil production registered an uptick of 0.8% WoW.

Market Signals

Positive contributions came from Banks (+1,062 points), Cement (+531 points), Auto Parts (+104 points), Auto Assemblers (+67 points), and Investment Banks (+62 points).
Negative contributions came from Fertiliser (-318 points), E&P (-214 points), Oil Marketing Companies (-159 points), Power (-102 points), and Refinery (-43 points).
Average daily volumes decreased by 7.2% WoW, while average traded value settled down 13.1%.

Winners & Losers

Investors in the Banking, Cement, Fertiliser, and Investment Banking sectors are likely to see gains. Companies in the Oil & Gas Exploration, Power Generation & Distribution, Oil Marketing Companies, and Food & Personal Care Products sectors may face headwinds.

Action Timeline

Immediate (24-48h): Monitor Banking and Fertiliser sectors; analyze the impact of the US-Pakistan trade pact; assess profit-taking trends.
Short-term (1-2 weeks): Capitalize on positive market momentum while remaining cautious of profit-taking.
Long-term: Monitor upcoming corporate earnings, progress in resolving circular debt, and the continuation of the IMF program.

Risk Assessment

Moody's continues to classify Pakistan's credit rating in the "very high credit risk zone."
Profit-taking suggests potential for short-term volatility.
Pakistan's economic stability relies on timely financing from official partners, including the IMF.

Key Indicators

The Moody's upgrade signals growing confidence in Pakistan's economic trajectory.
The decline in power sector circular debt enhances financial stability.
Services exports rose 9.2% YoY.

Regional Perspective

The Pakistan Stock Exchange has reached all-time highs, driven by strong corporate earnings and a Moody's credit rating upgrade, reflecting an improvement in the country's economic standing.

Immediate Implications

Sectors like Banking and Cement are expected to remain key market drivers.
Investment opportunities are increasing in companies benefiting from trade pacts and improved economic conditions.
Investors should watch profit-taking trends to avoid short-term losses.

What to Watch

Upcoming corporate earnings results.
Government progress in resolving the circular debt issue.
IMF program reviews.
MSCI Index review (August 2025).

Analysis

The strong performance of Pakistan's stock market, driven by the Moody's upgrade and structural reforms, signals improved economic confidence. However, profit-taking suggests a need for caution as the market faces significant resistance levels.