Pakistan’s KSE-100 Index has delivered a stunning 48% year-to-date return through November 2025, outpacing every major Asian benchmark including India’s Sensex (up 22%), Japan’s Nikkei (up 18%), and Hong Kong’s Hang Seng (up 14%). The Karachi Stock Exchange now stands as Asia’s best-performing market for the second consecutive year, a dramatic turnaround from the near-default crisis of 2022-2023.
Macro Stability Returns After IMF Bailout Success
The cornerstone of this rally is restored macroeconomic confidence. Pakistan completed its $7 billion Extended Fund Facility (EFF) with the International Monetary Fund in September 2025, marking the first time in decades the country exited an IMF program without needing a follow-up bailout. Key achievements include:
- Foreign reserves climbing above $13 billion (highest since January 2022)
- Current account surplus for 14 straight months
- Inflation cooling from 38% in May 2023 to single digits by mid-2025
- Policy rate slashed 1,200 basis points since June 2024 to 12.5%
Rupee Strength and Record Remittances Fuel Liquidity
The Pakistani rupee, once Asia’s worst performer, has appreciated nearly 9% against the dollar in 2025 – the strongest currency in emerging Asia after the Chinese yuan. Combined with record worker remittances crossing $36 billion annualized, this has flooded the system with dollar liquidity, much of which is finding its way into equities.
Energy Sector Turnaround Sparks Broad-Based Gains
Circular debt in the power sector dropped below PKR 2.3 trillion for the first time in six years after aggressive tariff rationalization and anti-theft drives. Independent Power Producers (IPPs) that were bleeding cash in 2023 are now posting 40-60% profit growth, making energy the top-performing sector with over 85% returns in 2025.
Banking Sector Reaps Dividend Windfall
Pakistan’s commercial banks, holding more than 60% weight in the KSE-100, are trading at forward P/E ratios below 4x despite delivering ROEs above 40%. Massive provisioning reversals, lower infection ratios, and a high-interest-rate tailwind from 2023-2024 have created a perfect storm of earnings surprises.
Foreign Investors Return in Force
Net foreign buying crossed $450 million in the first ten months of 2025 – the highest inflow since 2014. Global funds that completely exited Pakistan during the 2022-2023 crisis are now overweight again, citing “asymmetric upside” at valuations still 60% below historical averages.
Textile Exports Hit All-Time High
A weaker real effective exchange rate until early 2025, combined with GSP+ status retention in the EU and new FTAs with Malaysia and Indonesia, pushed textile exports past $20 billion annualized. Listed textile giants reported their best margins in a decade.
What Analysts Are Saying Now
Top brokerage targets for the KSE-100 now range between 140,000 and 155,000 by December 2026 (another 35-50% upside from current levels). Arif Habib Limited calls Pakistan “the most undervalued market in the world,” while JPMorgan added the country to its overweight emerging-market basket in October 2025.
Risks Still on the Radar
Political noise ahead of the 2028 elections, climate vulnerabilities, and potential reversal of IMF reforms remain key concerns. Yet the risk-reward equation has flipped decisively in favor of bulls.
From the brink of sovereign default to Asia’s top-performing market in just two years – Pakistan’s equity story in 2025 is one of the most remarkable comebacks in global emerging-market history. For investors hunting value in a world of expensive assets, Karachi is suddenly impossible to ignore.
