The KSE-100 Index has surged by 27% in dollar terms in 2024, positioning itself as the best-performing stock market in Asia, according to Bloomberg.
Experts predict that the index could gain an additional 10% by the end of the year, driven by foreign investments and other key factors.
Despite ongoing economic challenges, Pakistan’s stock market has shown remarkable resilience. Analysts attribute this performance to the KSE-100’s attractive valuations, which are among the lowest in Asia, and the recently proposed budget aimed at securing a new IMF loan.
A stable rupee and easing inflation have also boosted prospects for potential rate cuts.
Topline Securities Ltd and Arif Habib Ltd both highlight the KSE-100 Index’s outperformance compared to other Asian markets, expecting further gains as the year progresses.
Ali Hussain, Head of Research at Dubai-based Frontier Investment Management Partners Ltd, noted the market’s potential, citing low valuations, high positive real rates, and a reasonably valued currency as key factors.
Despite recent record highs, the KSE-100 index remains affordable with a one-year forward earning-based valuation of 3.8 times, a 50% discount to its historical average.
The government has increased taxes on various industries, including cement, automobile, and steel, to meet its financial needs and comply with IMF guidelines. This is crucial for meeting the $24 billion debt obligations due in the next fiscal year.
Bloomberg Economics has pointed out the political risks, noting that the coalition government could face instability if the Pakistan Peoples Party (PPP) withdraws due to public pressure over the IMF compliance measures.
Nevertheless, investors remain optimistic. Arif Habib Ltd predicts that foreign investment, earnings growth, and strong local liquidity will continue to drive market momentum for the next few years.
Bilal Khan, Institutional Equity Sales head at Arif Habib Ltd, anticipates a favorable external position due to the new IMF program, supporting ongoing bullish sentiment in the market.