KARACHI: The Pakistan Stock Exchange (PSX) has experienced a remarkable comeback in the calendar year 2024, following years of lacklustre performance as stocks surged by 84.34 percent, making it the second-best performing market globally, analysts said.
Over the last 18 months, the PSX has been the top-performing market in the world with a 178 percent gain. This represents the strongest performance in Pakistan’s 77-year history over such a short period.
“Despite this record-breaking rally, Pakistan stocks are still trading at an average forward P/E ratio of 6.3x, signalling significant potential for further growth”, Muhammad Sohial, leading analyst and CEO of Topline Securities said.
The benchmark Index (KSE 100) provided a gain of 84.34 percent (87 percent in US$) in 2024, highest return in 22 years. Previously, index saw high return of 112 percent in 2002.
This above-mentioned return is inclusive of dividends received during this period.
“Improving macroeconomic indicators under the new IMF program, i.e. falling inflation, falling yields on fixed income, aggressive monetary easing of 900 bps by the central bank improved external accounts, stable currency, and political stability, drove the strong performance of market in 2024”, Topline Securities research report said.
Total market capitalisation also increased by 63 percent to $52 billion but still below its 2017 peak of $100 billion. “The decline is due to rupee devaluation, large dividend payouts and fewer new listings”, the report said. Similarly, Market cap to GDP of Pakistan now stands at 12 percent compared to 9 percent in 2023, however, still lower than last 10-year average of 16 percent, it added.
This significant rise in index has been accompanied with significant improvement in trading activity with volumes (ready/ cash) per day at PSX up 76 percent to 569 million shares per day in 2024 which is all time high. Similarly, average traded value per day was up 122 percent to Rs 22 billion per day in cash market which was also highest since 2007.
In futures market, total traded volume and value per day were also up by 68 percent and 80 percent to 184 million shares per day and Rs 8.0 billion per day, respectively.
Pakistan’s KSE-100 Index was among the second best-performing markets in US dollar and local currency after Argentina in 2024.
KSE Index also outperformed other asset classes available in Pakistan in 2024 including Pakistan Investment Bonds (PIBs) (up 27 percent), Gold (up 24 percent), 1-year PKR Naya Pakistan Certificate (up 22 percent), T-Bills (up 21 percent), US Dollar (up 1 to 4 percent), and Property (down 11 to plus 14 percent) in 2024.
PSX also saw an increase in offerings in 2024, with the bourse witnessing 07 IPOs (including 02 GEM Board offerings), compared to just 01 IPO in the previous year. The total amount raised from investors through the 07 offerings in 2024 stood at Rs 8.4 billion, marking the highest level since 2021.
One major development that took place at PSX in 2024 was listing of government Shariah Compliant bonds/ Sukuks. In 2024 through 15 auctions government raised Rs 2,0 trillion. However secondary market trading remains thin with volume of less than Rs 163 million per day till December 16, 2024.
According to report, local Mutual Funds and Insurance Companies emerged as major buyers, capitalising on falling interest rates, while foreign investors were net sellers due to passive fund outflows.
The Mutual Funds witnessed record net buying of $183 million (Rs 51 billion) in 2024, the highest since 2017, when it stood at $217 million (Rs 23 billion). This buying is mainly attributed to a shift from fixed-income instruments to equity funds amid lower interest rates, it added.
Insurance Sector remained the second-largest net buyer in 2024, following three consecutive years of net selling. It recorded net purchases of $60 million (Rs 17 billion) during the year.
Both local Mutual Funds and Insurance sectors buying absorbed selling of 03 international passive funds in Pakistan to the extent of $210-220 million. The international funds which exited or near to exit Pakistan in 2024 are, iShares Frontier, Select EM ETF and Vanguard.
“Despite selling of $210-220 million by these foreign funds, overall FIPI (corporate net of debt) clocked in at negative $89 million. This suggests, active foreign corporates bought shares of $120-130 million in 2024.”
Copyright Business Recorder, 2024
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