Karachi: Pakistan’s stock market achieved a remarkable 51% return in 2025, marking its third consecutive year of significant growth. This impressive performance brought the two-year cumulative returns to 179%, with the market’s gains including dividends received over this period. In US dollar terms, the market posted a return of 50%, with a two-year cumulative increase of 180%.
The substantial price return, amounting to 40%, was largely attributed to the re-rating of the index, with the price-to-earnings ratio rising from 4.1x in December 2024 to 7.1x by the end of 2025. An 8% dividend yield further contributed to the robust market performance.
This positive momentum was fueled by several factors, including a stable and improving economy, political stability, lower interest rates, and a stable Pakistani rupee. Key events supporting the market’s re-rating included successful reviews by the International Monetary Fund, credit rating upgrades by Standard and Poor's, Moody's, and Fitch Ratings, a 250 basis point decline in interest rates, stable macroeconomic indicators, the Pakistan-Saudi Arabia Defense Pact, and the privatization of Pakistan International Airlines.
Despite facing volatility from regional conflicts such as the Pakistan-India conflict in May 2025, the market quickly rebounded from a 5.6% loss within three sessions. Other factors affecting market volatility included the Iran-Israel war and the imposition of tariffs by the United States on global economies, including Pakistan.
The Pakistan Stock Exchange’s market capitalization surged by 36% in 2025 to reach $70 billion, although it remained below its 2017 peak of $100 billion. Trading activity saw substantial growth, with daily trading volumes reaching an all-time high of 797 million shares, a 40% increase from the previous year. The average daily traded value also reached a record high, up 64% to Rs37 billion in the cash market. In the futures market, traded volume and value per day increased by 35% and 76%, respectively.
According to Bloomberg data, Pakistan's KSE-100 Index ranked as the fifth best-performing market in the Asia-Pacific region in US dollar terms for 2025. The KSE Index was the second-best performing major asset class in the country, with gold taking the top spot with a 73% return.
The Pakistan Stock Exchange maintained its momentum in 2025, with seven offerings, including two GEM Board offerings and one migration. However, the total amount raised from investors through these offerings was Rs4.3 billion, compared to Rs8.4 billion in the previous year.