- KSE-100 Index surged 84% in 2024, driven by improving macroeconomics and aggressive monetary easing policies
According to Pakistan’s leading brokerage house — the Topline Securities, the benchmark Index of Pakistan Stock Exchange (KSE100) provided a gain of 84% in PKR terms (87% in US$) in 2024, highest percentage return in 22 years. Previously, index saw high return of 112% in 2002. This above-mentioned return is inclusive of dividends received during this period.
Improving macroeconomic indicators under the new IMF programme, i.e. falling inflation, falling yields on fixed income, aggressive monetary easing of 900 bps by the central bank, improving external accounts, stabling currency, and easing political noise drove the strong performance of market in 2024.
Capitalisation of Pakistan Stock Exchange also increased by 63% to US$52 billion but still remained below its 2017 peak of US$100 billion. The decline is due to rupee devaluation, large dividend payouts and fewer new listings.
Similarly, Market cap to GDP of Pakistan stood at 12% as compared to 9% in 2023, however, still lower than last 10-year average of 16%.
This significant rise in index has been accompanied with significant improvement in trading activity with volumes (ready/cash) per day at PSX up 76% to 569 million shares/ day in 2024 which is all time high. Similarly, average traded value per day was up 122% to PKR22 billion/ day in cash market which was also highest since 2007.
In futures market, total traded volume and value per day were also up by 68% and 80% to 184 million share/ day and PKR8 billion/ day, respectively.
According to Bloomberg data, Pakistan’s KSE-100 Index was among the second best-performing markets in US dollar and local currency after Argentina in 2024.
KSE-100 Index also outperformed other asset classes available in Pakistan in 2024 including Pakistan Investment Bonds (PIBs) (+27%), Gold (+24%), 1-year PKR Naya Pakistan Certificate (+22%), T-Bills (+21%), US Dollar (+1 to 4%), and Property (-11 to +14%) in 2024.
PSX also saw an increase in offerings in 2024, with the bourse witnessing 7 IPOs (including 2 GEM Board offerings), as compared to just one IPO a year ago.
The total amount raised from investors through the 7 offerings in 2024 was PKR8.4 billion, marking the highest level since 2021.
One major development that took place at PSX in 2024 was listing of government Shariah compliant bonds/ Sukuks. In 2024 through 15 auctions government raised PKR2 trillion. However secondary market trading remains thin with volume of less than PKR 163 million a day till December 16, 2024.
Local Mutual Funds and Insurance companies emerged as major buyers, capitalizing on falling interest rates, while foreign investors were net sellers due to passive fund outflows.
Mutual funds witnessed record net buying of US$183 million (PKR51 billion) in 2024, the highest since 2017, when it stood at US$217 million (PKR23 billion). This buying is mainly attributed to a shift from fixed-income instruments to equity funds amid lower interest rates.
Insurance sector remained the second-largest net buyer in 2024, following three consecutive years of net selling. It recorded net purchases of US$60 million (PKR17 billion) during the year.
Both local mutual funds and insurance buying absorbed selling of 3 international passive funds in Pakistan to the extent of US$220 million. The international funds which exited or near to exit Pakistan in 2024 are, iShares Frontier, Select EM ETF and Vanguard.
Despite selling of US$220 million by these foreign funds, overall FIPI (corporate net of debt) was reported at US$89 million. This suggest, active foreign corporates bought shares of US$130 million in 2024.
Since Pakistan has achieved the status of second best market in the world, it is the most appropriate time for new flotations. Financial advisors and brokerage houses are advised to focus on developing modern warehouses and their management systems. These are need of the time because up to 20% food grains and 40% vegetables and fruits go stale before reaching the market. Containing postharvest losses will yield myriad of benefits i.e. better return to farmers, lower prices for consumers and higher export proceeds for the country.
Many experts say it is an irony that not only public limited companies have to pay exceptionally high income tax, but shareholders are forces to pay income tax on dividend. Banks which are often termed ‘financial super markets’ are also subject to very high tax rate. Since banks play a major role in capital formation, these should be charged a flat rate of 25% tax.