The Real Shift: From Rerating to Earnings
The rally from 40k levels was largely a P/E rerating cycle.
The economy stabilized.
External account pressure eased.
Policy rates peaked.
Liquidity surged.
Multiples expanded.
Now the easy money is done.
From here onward:
• Returns will depend on earnings delivery.
• Spread compression matters (see Meezan Bank).
• Sector selection replaces index momentum.
This is the natural second phase of a bull cycle.
New investors expecting 2024-style explosive gains will be disappointed.
Disciplined investors will adapt.
Banks: Bigger Franchise, Thinner Spread
Meezan Bank is a perfect case study.
Deposits crossed Rs3.3 trillion (+28%).
Profit after tax declined.
Why?
Because in falling-rate cycles, asset yields adjust faster than funding costs.
Franchise expanded. Spread compressed.
This matters.
Bank rallies without earnings torque eventually pause.
That’s repricing — not panic.
“PSX Is a Game” — No. It’s Sector Rotation.
The narrative that “institutions coordinate targets like 220k by year-end” is emotionally satisfying.
But structurally incorrect.
Capital rotates because:
• Liquidity conditions change
• Rate expectations shift
• Earnings momentum diverges
• Risk appetite fluctuates
Banks outperform when:
– Rates stabilize
– NPL fears ease
– Deposit franchises gain
E&Ps outperform when:
– Oil expectations rise
– Currency stabilizes
– Dividend yield attracts
Autos react to:
– Rate cuts
– New entrants (Jaecoo disruption)
– Consumer credit trends
This is not conspiracy.
This is capital allocation logic.
