Fiscal year 2023-24: Pakistan Stock Exchange’s annual overview

KARACHI: The Pakistan Stock Exchange (PSX) emerged as the world’s best-performing market in the fiscal year 2023-24, posting an 89 per cent cumulative increase (94 per cent in US dollar terms). The market closed at a record high of 78,445 points.

Throughout the year, the market hit multiple milestones, with significant gains in June 2024. Market capitalisation exceeded Rs 10 trillion, setting a new record, as per an Express Tribune news report.

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The rally started with a $3 billion loan programme from the International Monetary Fund (IMF) in late June 2023, further supported by positive reviews of the domestic economy by the IMF. Loan tranches totalling $3 billion, along with new funds including $3 billion from other multilateral and bilateral creditors, boosted foreign exchange reserves and sustained investor confidence.

The parliamentary elections in February 2024 and stability in the rupee-dollar exchange rate encouraged foreign investors to return to the market. The presentation of the 2024-25 budget, with no changes to the capital gains tax regime, led to historic gains of over 3,000 points in a single day.

The PSX benchmark KSE 100-Index increased by 36,992 points, closing at 78,445 points in FY24. Muhammad Sohail, CEO of Topline Securities, highlighted these gains as the highest in the last two decades. Bloomberg data confirmed that Pakistan was the best-performing market over the past 12 months.

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Trading activity also improved significantly, with average traded volumes in the cash and ready market rising by 230 per cent to an average of 503 million shares a day. The average traded value surged by 337 per cent to Rs20 billion a day. In the futures market, average volumes increased by 116 per cent year-on-year to 160 million shares a day, with the average traded value up by 168 per cent to Rs7 billion a day. Foreign portfolio investors made net purchases of over $150 million after a decade, driven by restored investor confidence and an increased weight of Pakistan in the MSCI Frontier Markets Index.

The market saw five initial public offerings (IPOs) in FY24 compared to one in FY23. The government also raised significant funds through Sukuk auctions at PSX for the first time. Foreign investors bought T-bills worth over $300 million in FY24, reversing the $41 million sell-off in FY23.

Positive momentum was sustained by the successful completion of the IMF Stand-by Agreement (SBA), the initiation of a new IMF facility, a 29-month low inflation reading in May 2024, record monthly remittances in May 2024, resumed foreign inflows into domestic treasury bills, favourable FY25 budget measures, a 150 basis point policy rate cut, and currency stability amid strong dollar inflows.

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THE ROAD AHEAD

Topline Research projected that the benchmark index would reach 106,000 points in FY25, offering a 35 per cent return. Shahid Ali Habib, CEO of Arif Habib Limited, noted that following the policy rate cut and the federal budget FY25, market participants will monitor developments regarding the IMF’s Extended Fund Facility (EFF) programme, expected to further boost market momentum. The successful securing of the IMF programme is anticipated to unlock additional foreign inflows, increasing foreign exchange reserves and reducing external pressures.