Pakistan’s benchmark KSE-100 Index is projected to deliver a 36% return, reaching 109,250 points by June 2025, according to Arif Habib Limited’s latest Pakistan Strategy report.
The forecast is driven by the potential negotiation of the International Monetary Fund’s (IMF) Extended Fund Facility (EFF) program, a downward trend in the policy rate, and a shift in investments from fixed income to equities, all expected to re-rate the index.
The report also highlights an anticipated GDP growth of 3.2% in FY25, supported by improved agricultural yields, recoveries in industrial output, and growth in the services sector. Pakistan is expected to enter a new three-to-four-year EFF program with the IMF, potentially amounting to $6-8 billion.
Inflation is projected to average around 10.7% in FY25, while the current account deficit (CAD) is expected to reach $2.6 billion as import-led demand rebounds. The Pakistani Rupee is forecasted to average around 289 per USD in FY25.
AHL expects earnings to grow at 4.9%, with non-bank and non-exploration & production (E&P) sectors expected to post a 16% earnings growth. The KSE-100 is currently trading at a 2025 price-to-earnings (PE) multiple of 4.2x, which is lower than the 5-year historical average of 5.9x.
The local bourse is anticipated to attract more attention in FY25, given its impressive performance in FY24, where it was the world’s best-performing market with a 94% return. The KSE-100 is the second most liquid market in the MSCI Frontier Markets (FM) space, with an average daily trading value (ADTV) of $55 million in FY24.
Furthermore, the index is one of the cheapest markets in terms of the PE ratio at 4.2x, compared to the regional market average of 12.1x, and offers an attractive price-to-book (P/B) ratio of 0.8x vis-à-vis the regional P/B average of 1.6x.
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