The Pakistan Stock Exchange (PSX) is on the verge of a historic milestone, with the benchmark KSE-100 Index closing in on the 100,000-point mark. On Thursday, the index surged by over 1,089 points (1.1%), reaching a record high of 96,635 points during intraday trading. This remarkable ascent reflects the growing optimism among investors, fueled by improving macroeconomic indicators, declining bond yields, and a stable fiscal environment.
Record-Breaking Rally
The KSE-100 has been one of the world’s best-performing indices in 2023, climbing 34,184 points (54.7%) so far this calendar year. Over the fiscal year, the index has surged by 21.80%, showcasing sustained growth momentum.
As the market approaches uncharted territory, analysts project further gains of up to 20% by the end of 2024, driven by favorable economic trends and increasing investor confidence.
Economic Indicators Driving the Market
- Inflation Drops to Six-Year Low
Pakistan’s inflation, once a pressing concern, has eased significantly.- October CPI: Declined to 7.2%, a dramatic drop from the record 38% inflation in May 2023.
- November Forecast: Expected to fall further to 4.6%, the lowest since April 2018.
The decline in inflation is attributed to falling food and transport costs, coupled with government interventions such as subsidies for electricity consumers. On a monthly basis, inflation is anticipated to rise slightly by 0.3%, driven by housing and transport costs, yet it remains at manageable levels.
- Monetary Policy Outlook
With inflation under control, the State Bank of Pakistan (SBP) is expected to ease monetary policy. Analysts predict a 150 basis point rate cut in the upcoming policy meeting, which would provide further liquidity to the equity market. - Current Account Surplus
For the third consecutive month, Pakistan recorded a current account surplus, reaching $349 million in October.- 4MFY25 (July-October): A surplus of $218 million, compared to a deficit of $1.53 billion in the same period last year.
- Exports Growth: Increased by 11.5% YoY in October to $3.71 billion.
- Remittances: Rose by 23.9% YoY in October to $3.05 billion, totaling $11.85 billion in the first four months of FY25.
The surplus highlights the country’s progress toward economic stabilization, supported by robust export growth and higher remittances, which offset a moderate increase in imports.
Market Performance Highlights
Top Contributors
Several companies and sectors were pivotal in driving the index higher.
- Top Gainers:
- FFBL: +9.39%
- FATIMA: +9.30%
- FFC: +8.79%
- PKGP: +6.44%
- PSEL: +5.40%
- Sector Contributions:
- Fertilizer: Added a massive 948.35 points to the KSE-100 Index.
- Miscellaneous: +34.09 points
- Oil & Gas Marketing Companies: +29.03 points
- Commercial Banks: +29.00 points
- Automobile Parts & Accessories: +22.11 points
Trading Volume and Broader Market
The broader market also reflected positive investor sentiment.
- All-Share Index: Closed at 61,679.60, with a net gain of 497.43 points (0.81%).
- Trading Volume: Reached 1.13 billion shares, a significant jump from 830.93 million in the previous session.
- Total Traded Value: Rose to Rs37.48 billion, up by Rs7.46 billion from the prior session.
Broader Economic Implications
Stable Currency and Improved Sentiment
The Pakistani rupee has stabilized in recent weeks, providing additional support to investor confidence. The exchange rate against the US dollar stood at PKR 278.04 in the interbank market, while the open market rates hovered between PKR 276.50-279.00.
The rupee’s stability, combined with easing inflation and robust external accounts, has attracted foreign and domestic investors alike. Mutual funds alone have poured in over $129 million into the stock market since January.
Government Reforms and Fiscal Discipline
The government’s focus on fiscal discipline, export promotion, and remittance growth has borne fruit. The trade deficit for October narrowed by 20.4% MoM, while cumulative exports for 4MFY25 rose by 8.5% YoY to $13.11 billion.
Outlook for 2024 and Beyond
With the KSE-100 Index on the cusp of achieving the 100,000 milestone, the market is positioned for sustained growth in the coming year. The anticipated rate cuts, coupled with improved corporate earnings, are expected to drive further investment in equities.
Additionally, Pakistan’s macroeconomic indicators—declining inflation, current account surpluses, and stable currency—provide a strong foundation for long-term growth.
Challenges Ahead
Despite the positive momentum, risks such as global economic uncertainty, fluctuating commodity prices, and potential political instability could affect market performance. However, the current outlook remains broadly optimistic.
Conclusion
The KSE-100 Index’s rapid ascent toward 100,000 points underscores the resilience and potential of Pakistan’s capital markets. With inflation at record lows, the current account in surplus, and a stable policy environment, the market is set to break new records.
As 2024 approaches, investors are eyeing opportunities for further gains, making Pakistan’s stock market a focal point for regional and global investors. With continued reforms and fiscal prudence, the PSX could cement its position as one of the most attractive emerging markets in the region.
