By Qudsia Bano

Pakistan's capital markets witnessed a strong resurgence during FY2025-26, with the benchmark KSE-100 Index reaching an all-time high as improving macroeconomic stability, international credit rating upgrades and renewed investor confidence boosted market activity.

According to the Finance Division's Monthly Economic Update & Outlook (June 2026), investor sentiment improved considerably during the fiscal year, supported by the government's continued implementation of the International Monetary Fund's (IMF) Extended Fund Facility (EFF) and Resilience and Sustainability Facility (RSF) programmes. The positive momentum was further reinforced by sovereign credit rating upgrades from Fitch and Moody's, which helped strengthen confidence in Pakistan's economic outlook.

The report states that the improved economic environment enabled Pakistan to return to the international capital markets through the issuance of a Eurobond after a gap of four years. The successful launch of the country's first Panda Bond also diversified external financing sources and reflected growing confidence among international investors in Pakistan's economic reform programme.

According to the Finance Division, these positive developments were mirrored in the performance of the Pakistan Stock Exchange (PSX), where the KSE-100 Index reached an all-time high and ranked among the fastest-growing equity markets in Asia during the fiscal year.

The report notes that the stock market maintained strong upward momentum during May 2026. The KSE-100 Index gained 10,969 points during the month to close at 173,963 points, driven by improving geopolitical sentiment following the ceasefire and peace efforts in the Middle East, together with sustained buying by local and institutional investors.

Market capitalisation also recorded a substantial increase. According to the report, the total market value of listed companies rose by Rs1.14 trillion during May alone, reaching Rs19.17 trillion by the end of the month as investor participation continued to strengthen.

The positive momentum extended into June. As of June 29, 2026, the benchmark index had climbed further to 178,414 points, representing a 43.3% increase compared with the corresponding period last year. Total market capitalisation rose to Rs20.02 trillion, reflecting annual growth of 32.9%, while the dollar value of the market increased by 35.5% to $71.96 billion.

The report also points to growing corporate activity in the formal economy. During July-April FY2025-26, the Securities and Exchange Commission of Pakistan (SECP) registered 36,059 new companies, representing a 24.8% increase over the same period last year. According to the Finance Division, the rise in company incorporations indicates improving business confidence and expanding entrepreneurial activity.

According to the report, continued macroeconomic stabilisation, prudent fiscal management and a stable external account have played an important role in restoring investor confidence. Improvements in foreign exchange reserves, sustained remittance inflows and stronger economic growth have also supported the positive outlook for Pakistan's financial markets.

The Finance Division believes that ongoing structural reforms, continued implementation of the IMF-supported programme and a more business-friendly environment will further strengthen Pakistan's capital markets. The report concludes that sustained investor confidence will remain important for mobilising investment, supporting private sector growth and contributing to long-term economic development.

Credit: INP-WealthPk