Pakistan’s equity market delivered a striking performance in fiscal year 2025, propelling the country onto the global map of top stock market achievers. According to the latest report by Arif Habib Limited (AHL), the benchmark KSE-100 Index of the Pakistan Stock Exchange (PSX) returned an impressive 55.5 percent in US dollar terms, securing the third spot among the best-performing stock markets worldwide.
Only Ghana and Slovenia outpaced Pakistan’s equity market in FY25. Ghana’s GGSECI Index posted a phenomenal return of 140.7 percent, while Slovenia’s SBITOP Index managed a 56.7 percent gain. This puts Pakistan ahead of many major developed and emerging markets, a testament to the KSE-100’s resilience and the supportive domestic market conditions that fueled investor sentiment.
Comparisons with global peers underline just how remarkable Pakistan’s market rally was. The tech-heavy Nasdaq Index in the United States delivered a comparatively modest 14 percent return, Germany’s DAX closed the period up by 46.9 percent, India’s Sensex edged higher by only 3.2 percent, and Japan’s Nikkei added 12.8 percent. Closer to the region, most markets struggled, with Turkey’s benchmark falling by 28.1 percent and Bangladesh retreating by 13.6 percent.
In local currency terms, the KSE-100 Index surged by an even more substantial 58.6 percent during FY25, closing at 124,379 points, up from 78,445 at the end of FY24. AHL attributed this exceptional rally to a mix of aggressive monetary easing by the central bank, improved liquidity in the financial system, and the unlocking of value across several key sectors of the economy.
The brokerage highlighted that the market’s growth was broad-based, with various sectors showing strong earnings momentum and benefiting from more stable economic indicators. As interest rates moved downward and liquidity conditions improved, both institutional and retail investors found renewed confidence to increase their exposure to equities.
Meanwhile, AHL’s report also shed light on the regional portfolio investment landscape, revealing that foreign investors were net sellers across nearly all listed Asian markets during FY25. Taiwan saw the heaviest outflows, totaling $28.7 billion, followed by South Korea at $23.6 billion and India at $11.3 billion. Malaysia, Vietnam, Thailand, Indonesia, and the Philippines also recorded notable net selling, ranging from $3.5 billion to under $500 million.
Pakistan was no exception, with foreign investors pulling out approximately $300 million during the same period. AHL suggested that a combination of factors contributed to this trend, including geopolitical tensions, newly introduced reciprocal tariffs by the US, persistently high global interest rates that initially led to capital repatriation, continued strength in the US dollar, and a shift of portfolios toward developed markets perceived as safer havens.
Despite these outflows, the local equity market managed to thrive, reflecting strong domestic participation and a banking sector supportive of equity investment due to an improved monetary backdrop. Analysts believe that if macroeconomic indicators remain stable and the government maintains its reform trajectory, Pakistan’s stock market could continue to stand out as an attractive frontier investment destination in the coming year.