PSX benchmark index declines by 3.32%WoW

Pakistan Stock Exchange (PSX) remained highly volatile throughout the week ended on April 11, 2025, with investors reacting to the US imposing reciprocal tariffs on all the countries, 29% tariffs on Pakistan. This eroded investor confidence causing KSE-100 index to fall by 3,938 points or 3.32%WoW during the week, closing in at 114,853 points.

On the first trading day, KSE-100 fell by as much as 7.3% with a market halt in order to control volatility, with the index recovering by day end, closing in at negative 3.3% by day end. However, with the US changing its stance on the tariffs imposed by announcing a 90-day pause on tariffs on all countries, keeping 10% base tariffs intact, except for China, KSE-100 index posted an opening of 2,941pts, up 2.58% on Thursday. Last day of the week once again saw a bearish session due to escalation of dispute between US and China, with the tariffs on China being 145% by the US and tariffs on US being 125% by China.

Expectation of further cuts in policy rate resulted in Commercial Banks eroding 1,399 points from the index. Falling global oil prices, with Brent down by 3.8%WoW, negatively impacted the E&P Sector.

Average daily trading volume was up by 14%WoW to 557 million shares, as compared to 488 million shares traded a week ago.

ADB revised Pakistan’s GDP growth forecast for FY25/FY26 to 2.5%/3.0% and inflation forecast for FY25/FY26 to 6.0%/5.8%, respectively.

Foreign exchange reserves held by State Bank of Pakistan (SBP) were up by US$28 million to US$10.7 billion as of April 04, 2025.

Other major news flow during the week included: 1) Cement Sales decreased by 9.5%YoY, 2) Petroleum sales increased 5%YoY, 3) Auto Sales declined 8%YoY, 4) Pakistan delegation to visit United States for tariff discussion, and 5) GoP raises PKR427 billion in PIB auction.

Pharmaceuticals, Cement, and Textile Composite were amongst the top performing sectors, while laggards included Fertilizer, Textile Weaving, and Technology and Communication.

Flow wise, barring debt, major net selling was recorded by FIPI, Individuals and Mutual Funds with a net sell of US$19.4 million. Companies absorbed most of the selling with a net buy of US$19.3 million (including KOHC buyback of US$16.5 million).

Top performing scrips of the week were: PGLC, TGL, GLAXO, PSX, and LUCK, while top laggards included: EFERT, SRVI, PPL, ENGROH, and UBL. 

 According to AKD Securities, lower oil prices and favorable standing among exporting peers amid reciprocal tariffs would support the economy.

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 include: OGDC, PPL, PSO, FFC, ENGROH, MEBL, MCB, HBL, LUCK, FCCL, INDU, ILP and SYS.

Russia-China trade on the rise

Days before Putin ordered his troops into Ukraine, President Joe Biden and US allies warned that an invasion would result in devastating sanctions and crippling costs. By summer end, some 30 countries had imposed various forms of sanctions on Russia’s energy and financial sectors, as well as on Russia’s ability to import semiconductors and key technology components.

Despite Putin’s claims that Western economic restrictions and penalties have had little impact, evidence suggests otherwise. Making transactions has become more difficult, supplies of important goods have been much more limited, and the ability for many Russian businesses and businesspeople to move through overseas commercial centers, has become harder. Some 1,200 foreign companies have either sharply reduced operations in Russia or left there altogether.

But many other countries have chosen not to join the sanctions effort, and some seem to view the invasion—complete with atrocities and veiled threats of strategic nuclear weapons—as a business opportunity.

According to Chinese customs data, its bilateral trade with Moscow grew 31% in the first eight months of 2022. In July, China imported US$10 billion worth of goods from Russia, an increase of 49.3% from July 2021. China relies heavily on Russia for oil imports, with crude petroleum making up about 48.3% of total Russian imports to the country. Meanwhile, Russia primarily leans on China for electronics such as broadcasting equipment and computers, which make up about 14% of Chinese imports to Russia.

To be clear, close economic ties between Russia and China aren’t anything new. Since 2014, China (coincidentally, the year Russia illegally invaded and began occupying Crimea) China has remained Russia’s largest trading partner, while Russia is China’s fourteenth largest trading partner. China’s determination not to join in sanctions has amplified Russia’s dependence on what China’s markets and financial systems offer. 

When Xi and Putin met to discuss China-Russia relations on September 15, 2022 during the summit of the Shanghai Cooperation Organization, it was the first time the leaders met since they established a “no limits” relationship shortly before Putin’s invasion.

While China watchers noted Putin’s admission that China had questions about the war in Ukraine, he still exuded confidence in China-Russia relations as a strategic, comprehensive partnership with expectations for the alliance to deepen bilaterally and internationally.

With news of battlefield setbacks reaching domestic audiences in Russia, President Putin will likely be more sensitive than ever about any complaints by Russian citizens about food shortages or daily economic hardships.

If more countries were to join the US and its allies in imposing sanctions, one wonders how long Putin could maintain his current special military operation. Given Russia’s increased reliance on Chinese trade, what would happen if China were one of those countries?