Pakistan’s stock market has been experiencing a historic bull run, which began last year following an International Monetary Fund (IMF) loan deal. This remarkable upward trajectory has been further bolstered by a strong foreign buying spree, renewed expectations of interest rate cuts due to improving economic conditions, and ongoing discussions for a new IMF program.
Surge in Foreign Investment
Foreign investors have been actively accumulating Pakistani stocks throughout the fiscal year 2024. As of the current month, foreign buying has reached $21.95 million, marking the longest monthly buying streak since at least 2016, according to data from the National Clearing Company of Pakistan Limited (NCCPL). Over the fiscal year, foreign investment in Pakistani stocks has totaled a substantial $145 million, in stark contrast to an outflow of $5.5 million during the same period last year.
Impressive Market Performance
The benchmark KSE-100 index has surged by 33,478 points, or 80.8%, during fiscal year 2024, reaching a record high of 74,930. In terms of USD, the KSE-100 index has jumped 85.7% year-to-date, positioning it as one of the best-performing markets worldwide. This performance underscores the robust confidence in the Pakistani stock market amid favorable economic developments.
Economic Optimism and IMF Engagement
The economic outlook for Pakistan in the ongoing fiscal year 2024 has been notably optimistic. Recently, the IMF Executive Board approved the second review under the Stand-By Arrangement (SBA) for Pakistan, allowing for an immediate disbursement of $1.1 billion. Furthermore, Pakistan has initiated discussions with the IMF for further engagement, with the aim of securing a larger and longer-term deal. Wall Street bank Citi anticipates that Pakistan will reach an agreement with the IMF for a new four-year program worth up to $8 billion by the end of July.
Signs of Economic Recovery
Economic growth in Pakistan is showing signs of recovery, while inflation is trending downward. Following a fourth consecutive decline in weekly inflation, the Consumer Price Index (CPI)-based inflation for May is expected to fall to about 13-14% year-on-year, expanding real interest rates to 8-9%. These improvements in the economy are attributed to favorable external conditions and sound policy management. Both the fiscal and external sectors have demonstrated resilience, further boosting market confidence.
Positive Market Sentiment
The upbeat market sentiment is reflected in the notable performance of the Pakistan Stock Exchange (PSX). The ongoing economic improvements and prudent policy measures have instilled confidence among investors, leading to a significant influx of foreign investment and a historic rise in the stock market.
