In 2023, the Pakistan Stock Exchange (PSX) experienced a remarkable turnaround, with the KSE-100 reaching new heights and solidifying its position as the top-performing asset class in the country. Over the year, the KSE-100 Index surged to 62,451.04, marking an impressive gain of 22,031 points, equivalent to a substantial return of almost 55% in rupee terms. The former interim government implemented a series of strategic measures in Q1FY23-24 aimed at enhancing financial stability and bolstering investor confidence in Pakistan. Among these initiatives was the State Bank of Pakistan’s implementation of “structural reforms” for Exchange Companies, as well as administrative actions targeting currency smugglers, hoarders, and illegal exchanges. These proactive steps not only contributed to stabilizing the rupee but also instilled a sense of trust and assurance among investors in the country’s economic landscape.
28 March 2024, marked a historic milestone for the stock market as the benchmark index closed at an unprecedented high of 67,142.12 points at the end of trading. This notable achievement reflected a significant uptick of 594.34 points, equivalent to a 0.89 percent increase. Surpassing the previous record set just a day prior at 66,547.78 points, this latest closing stood as the highest in the stock market’s history, underscoring the resilience and positive trajectory of the financial market. Its previous all-time high closing was 66,427.78 points on Dec 12. 2023.
Market analysts have linked the recent market rally to significant developments in the privatization process of Pakistan International Airlines (PIA) and advancements in a new bailout program. Both foreign and local institutional investors have been actively purchasing stocks, driven by the positive updates regarding the privatization of PIA and the ongoing negotiations with the International Monetary Fund (IMF). Pakistan and the IMF reached a staff-level agreement in March 2024 which paved the way for the release of $1.1 billion for the cash-strapped South Asian country. Pakistan has expressed its interest in securing a new loan under the Extended Fund Facility (EFF) program with the IMF.
According to financial expert and journalist Faseeh Mangi, the Pakistan Stock Exchange has emerged as one of the top global performers “following a rally that commenced last year subsequent to Pakistan averting a default.”
Additionally, the Pakistani rupee also demonstrated resilience against the US dollar in the inter-bank market on maintaining stability as it closed at 278.03 in the last week of March, showing a marginal increase according to the State Bank of Pakistan. Market activity witnessed a significant uptick, with the volume on the all-share index surging to 421.1 million from 354.6 million in the previous session. Simultaneously, the value of shares traded experienced a notable rise, climbing to Rs16.16 billion from Rs11.88 billion in the prior trading session. These developments highlight a robust level of market engagement and trading momentum, showcasing the steady performance of Pakistan’s financial markets.
In the past four to five months, there has been a notable surge in the repatriation of profits and dividends, facilitated by the central bank’s decision to permit foreign corporations to transfer foreign currency to their overseas headquarters, driven by the bolstering of foreign exchange reserves. Pakistan’s foreign reserves under the State Bank of Pakistan (SBP) have surged significantly, escalating from a low of $4.4 billion in June 2023 to $8.2 billion as of March 15, 2024, signaling a marked enhancement in the nation’s external financial standing. The seamless repatriation of dividends and profits by foreign investors is poised to not only attract foreign direct investment but also play a pivotal role in restoring investor trust and confidence in Pakistan’s economic landscape.
In addition to the current market dynamics, several other factors have played a role in shaping the prevailing trend observed in the stock market. These include positive shifts in macroeconomic indicators such as a decrease in inflation, a reduction in the fiscal deficit, along with efforts to combat smuggling through enhanced regulation of the Afghan Transit Trade. Furthermore, the agriculture sector has demonstrated robust performance, notably with bumper rice and cotton crops, contributing significantly to the overall market outlook. These combined factors underscore a multifaceted influence on the market conditions, reflecting a broader spectrum of economic developments impacting investor sentiment and market performance.
According to a research report by AKD Research, the trajectory of Pakistan’s stock market is anticipated to surpass the 80,000 mark by the conclusion of 2024, driven by ongoing economic reforms, monetary relaxation, and enhanced macroeconomic metrics. Forecasts suggest a decline of 500 basis points in interest rates throughout 2024, commencing in March, as inflationary pressures ease and the rate of money supply growth slows down. Projections also indicate a decrease in the average consumer price index (CPI) from 25.3% in 2024 to 11.5% in 2025, reflecting a positive outlook for inflation management and overall economic stability in the coming years. This surge in performance reflects the resilience and attractiveness of the Pakistani stock market, showcasing its potential for investors and signaling positive momentum for the country’s financial landscape.
By: Hira Tahir
