Despite prevailing economic crises, Pakistan’s stock market has shown resilience by emerging as the best-performing market in Asia in 2024, according to Bloomberg.
Strategists believe the market is likely to see further gains due to its status as one of the cheapest in the continent. The recently proposed budget, aimed at securing a new loan from the International Monetary Fund (IMF), also supports this outlook.
Additionally, a stable rupee and easing inflation have raised prospects for rate cuts.
Topline Securities Ltd and Arif Habib Ltd report that the KSE-100 index has outperformed other Asian stock markets, showcasing a 27% increase in dollar terms in 2024. They predict gains will increase by another 10% by the end of the year.
Ali Hussain, Head of Research at Dubai-based Frontier Investment Management Partners Ltd, commented on the KSE-100 Index’s performance, stating, “There’s a lot of juice left in this rally […] cheap valuations, high positive real rates, and a fairly valued currency make a very attractive case right now.”
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 lifetime average.
It is important to note that Islamabad has increased taxes on various industries such as cement, automobile, and steel to address financial needs and comply with IMF guidelines, as the lender’s program is crucial for meeting the $24 billion debt payments due in the next fiscal year.
Bloomberg Economics has highlighted potential political instability, with the possibility of the coalition government being toppled if the Pakistan Peoples Party (PPP) decides to withdraw due to public pressure over the government’s compliance with the IMF’s conditions.
However, investors remain optimistic. Arif Habib Ltd predicts that foreign buying, earnings growth, and robust local liquidity will drive market momentum for the next couple of years.
Bilal Khan, Head of Institutional Equity Sales at Arif Habib Ltd, stated, “With the new IMF program spanning the next three years, we anticipate a favorable external position, supporting continued bullish market sentiment.”
