Stock market slump: KSE-100 loses approximately 500 points due to profit-taking
The Moody's credit rating upgrade of Pakistan to 'Caa1' from 'Caa2' has brought a wave of positivity to the Pakistan Stock Exchange (PSX) and the KSE-100 Index. This upgrade, announced in August 2025, signals improving economic stability and investor confidence.
The upgrade reflects progress in Pakistan’s external position and IMF-supported reforms, leading to increased foreign investor optimism and an upward movement in market prices. Following the announcement, Pakistan’s international bonds rose to their highest levels since early 2022, reflecting reduced investor fears of default and improved market sentiment.
The Pakistan Stock Exchange, including the benchmark KSE-100 Index, generally benefits from such sovereign rating upgrades as they attract increased foreign and domestic investment by lowering perceived credit risk. Despite the upgrade, Moody’s cautions that Pakistan’s fiscal and external vulnerabilities remain significant, given weak governance, political uncertainty, and a still fragile external position requiring ongoing IMF program support.
On Wednesday, the KSE-100 Index opened at an intra-day high of 147,892.25, but selling pressure erased intra-day gains, pushing the index to an intra-day low of 146,417.80. The decline was mainly driven by profit-taking, according to Sana Tawfik, Head of Research at Arif Habib Limited (AHL).
Meanwhile, the US stock market scaled new heights on Tuesday, with the highly anticipated US inflation readings indicating President Donald Trump's tariff regime had yet to filter down to consumer prices.
Elsewhere in Asia, Japan's Nikkei stock index rose 1.4%, setting a new peak for a second-straight session. The US dollar was subdued on Wednesday, and the Pakistani rupee maintained its upward momentum against the US dollar, appreciating 0.07% in the inter-bank market. At close, the currency settled at 282.22, a gain of Re0.20.
Key context and effects include:
- Moody’s upgrade to 'Caa1' with a stable outlook indicates Pakistan remains in a high-risk category but is on a gradual path to financial improvement, supported by higher foreign exchange reserves ($14.3 billion as of July 2025) and IMF program compliance.
- The MSCI All Country World Index of shares climbed for a second day to reach a new all-time high, while stocks in Asia climbed on Wednesday.
- Amreen Soorani, Head of Research at Al Meezan Investment Management Limited, stated that the credit rating upgrade aligns with a view shared earlier in the fiscal year.
- Positive momentum in LUCK, HBL, and MEBL provided a combined uplift of 269 points, while significant downward pressure stemmed from FFC, EFERT, PPL, MCB, and HMB, which together shaved off 488 points from the benchmark.
In summary, Moody’s upgrade has helped restore some confidence in Pakistan’s financial markets, contributed to the recovery of Pakistan’s sovereign bonds, and positively influenced the PSX and KSE-100 Index by supporting an improved investment climate amid ongoing economic reforms.
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