On Thursday, the Pakistan Stock Exchange (PSX) celebrated a historic milestone as the benchmark KSE-100 Index surged by 1,271.04 points (1.26%) to reach 100,216.57, crossing the 100,000 mark for the first time in its history.
This achievement follows a period of remarkable growth, with the index delivering a 150% return over the past 17 months, rising from 40,000 to 100,000 points.
Key Factors Driving the Rally
- Improved Macroeconomic Environment:
- IMF Bailout: The latest IMF loan has bolstered investor confidence, helping stabilize Pakistan’s external accounts.
- Declining Inflation: Inflation rates have dropped significantly, from a staggering 38% to 7.2%, alleviating economic pressure.
- Monetary Easing:
- The State Bank of Pakistan (SBP) has cut its policy rate by 700 basis points this year, making borrowing cheaper and boosting liquidity in the equity market.
- Market Valuation:
- Despite the rally, the price-to-earnings (P/E) ratio of the KSE-100 remains at a discounted 4.7x, compared to the historical average of 7x, offering attractive investment opportunities.
- Political Stability:
- A reduction in political uncertainty has helped sustain investor optimism, contributing to the market’s momentum.
Historical Perspective
- Long-term Growth: From fewer than 1,000 points in the late 1990s to 100,000 points today, the PSX has grown by 100 times in 25 years.
- Annualized Returns:
- 20% in PKR terms over 25 years.
- 13% in USD terms, reflecting the market’s resilience through periods of both optimism and economic challenges.
