Pakistan Stock Exchange (PSX) closed the week, month and the year on a positive note, with the benchmark KSE-100 Index gaining 745.95 points on week-on-week, 1,919.77 points on month-on-month and 22,030.59 on a yearly basis to settle at 62,451.04 points.
The benchmark KSE-100 index registered a 14-year high growth at 54.5 percent during the calendar year. The market had dived to a three-year low at 38,136 points in January amid political instability and growing economic hardships. The growth came when foreign investors staged a comeback after a hiatus of three years with the return of stability to the rupee-dollar exchange rate. It boosted the confidence of almost all investors.
The year 2023 remained an eventful, record-making and breaking period during which the bourse skyrocketed to a historic high at 67,094 points in December. Its rally was driven by optimism over the upcoming reduction in the central bank’s key policy rate from a record high of 22 percent and significantly low share prices as compared to their peaks.
Topline Research reported that the PSX emerged as the best performing market in the second half of 2023 with 51 percent gains in rupee terms and 24 percent return in US dollars. For the full year 2023, the benchmark KSE-100 index got the title of third best performing market in local currency. Arif Habib Limited (AHL) reported that Pakistan’s bourse ranked 14th around the world in 2023 in terms of returns in US dollars.
Topline Research said, “In the second half of 2023, a better-than-expected IMF standby arrangement (SBA), followed by the successful completion of the first IMF review, a stable currency and the announcement of elections helped improve investor sentiment.”
Foreign corporate investors turned net buyers in 2023 after a gap of three years with net buying of $73.3 million – the highest after eight years. In the past three years (2020-22), foreign investors had sold shares worth $1.1 billion. Major foreign buying was witnessed in commercial banks ($36 million), oil and gas exploration companies ($17 million) owing to revision in gas tariffs and expectation of resolution of the circular debt issue, and power companies ($17 million).
This sudden recovery in prices has also been accompanied with a significant improvement in trading activity with daily volumes in the ready market going up 41pc to 323 million shares in 2023, highest since 2021. Similarly, the average traded value per day went up 45pc to Rs10 billion in the cash market, also highest since 2021.
The KSE-100 index also outperformed other asset classes in 2023, including one-year dollar-based Naya Pakistan Certificate (up 33pc), the dollar (24pc), treasury bills (23pc) and gold (21pc).
The PSX saw just one IPO in 2023, with total raised funds amounting to a meagre Rs435m. This was the lowest amount raised in a year in the past decade and a half.
Pakistan’s Gross Domestic Product (GDP) growth rate witnessed a modest recovery in 3QCY23, recording at 2.13% as compared to 0.96% in 3QCY22. The current account position of the country has also improved significantly in 2023. In 11MCY23, the central bank data showed a current account surplus of $130 million, which is a significant improvement from 11MCY22’s huge deficit of $11.82bn.
Furthermore, the Pakistani Rupee (PKR) has recovered significantly thanks to the government’s crackdown on speculators, hoarders, and smugglers who were draining dollars from the country. The spread between interbank and open market rates, which reached a high of around 9% in May has now almost vanished, well below the IMF’s 1.25% recommended limit. Improved transparency, lower spread between interbank and black market rates, coupled with strict measures against dollar smuggling are also expected to boost workers’s remittances. These inflows will be crucial for the cash-strapped county to meet its external financial obligations.
After an intense rally, the local stock market can be expected to undergo a correction phase. Nevertheless, amid early indications of improved economic conditions, comparatively stable currency, downward trend in inflation, and a projected reduction in interest rates in 2024, the rally is expected to continue. Market analysts foresee the bullish trend extending into 2024, driven by robust earnings growth, appealing valuations, and consistent economic expansion.