Investors Celebrate Pakistan's Continuing Economic Recovery

[Riaz Haq]

Pakistan's benchmark KSE-100 index hit an all-time high after the announcement of the $7 billion IMF bailout deal today. Economic indicators such as inflation, exports and remittances are also showing significant improvement as well. Speaking to reporters after the IMF deal,  the Fund Managing Director  Kristalina Georgieva acknowledged progress made by Pakistan. She said  "The economy is on the sound path. Growth is up and inflation is down". The KSE-100 index rose in early trade to a record high of 82,905.73 points, before giving up those gains later in the day to close 0.7% down at 81,657. It still represents an annual gain of nearly 100%. 

Pakistani Stock Market Outperforms Asian Peers. Source: Bloomberg

Pakistan rupee has remained essentially stable at around Rs. 277 to a US dollar over the last year. Inflation has come down from 37% last year to less than 10% this year.  Exports have climbed 10.54% ($2.921 billion) to $30.645 billion during the fiscal year 2023-24 compared to $27.724 billion in the corresponding period of 2022-23. Overseas workers' remittances have surged 44% to $5.94 billion in the first two months (July-August) of the current fiscal year 2024-25, compared to the same period last year.  Current account deficit has declined to $681 million in FY24 from $3.275 billion in FY23. The budget deficit for the 2023–2024 fiscal year has been reduced to 6.8% of GDP from 7.7% in the previous year. 

The stock market gains are driven primarily by the increasing profitability of the firms making up the index, in addition to improvement in macroeconomic indicators. The companies listed on Pakistan’s KSE-100 Index have reported their highest-ever earnings of Rs1.7 trillion in FY24, marking a 25% year-on-year increase from Rs1.3 trillion in FY23. In US dollar terms, profits after tax (PAT) rose 10% to $5.8 billion during the same period, according to data compiled by brokerage firm Topline Securities.  Dividend payouts soared 30% as banking, fertilizer, and cement sectors led growth, according to media reports. 

Pakistan has a long tough road ahead to carry out the reforms promised to the IMF in the latest bailout deal. Renegotiating unsustainable IPP (Independent Power Producers) contracts and carrying out long-delayed  privatization of state-owned enterprises to reduce major drain on the taxpayers will not be easy, Boosting tax collection is not easy either. Offering incentives for savings, investments and exports while reducing budget deficits is a difficult feat. It will take a lot of fortitude, finesse and political will to get the results to improve the economy. Pakistani leaders' biggest challenge is to find a way to grow the economy to create enough jobs for the country's growing working age population. Failure to do so could cause major social unrest in the nuclear-armed country of 240 million people. 

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[Riaz Haq]

Arif Habib Limited
@ArifHabibLtd
*Trade deficit decreased by 26% YoY to USD 1.6bn during Oct’24*

During Oct’24, exports stood at USD 3.0bn (+11% YoY | +5% MoM). Imports during the month remained at USD 4.6bn (-6% YoY | -1% MoM).

During 4MFY25, trade deficit also decreased by 4% YoY to USD 7.1bn.

https://x.com/ArifHabibLtd/status/1857441100337664363

[Riaz Haq]

Arif Habib Limited
@ArifHabibLtd
As of Sep’24, Pakistan's Debt-to-GDP ratio has dropped to 65.7%, marking its lowest level since Jun’18. The Domestic Debt-to-GDP ratio is at 43.1%, while the External Debt-to-GDP ratio stands at 22.7%.

https://x.com/ArifHabibLtd/status/1856013052644061281

[Riaz Haq]

Pakistan Stock Exchange surpasses 93,000 points, signalling economic optimism - Dailynewsegypt


https://www.dailynewsegypt.com/2024/11/14/pakistan-stock-exchange-s...

The Pakistan Stock Exchange (PSX) 100 Index has crossed the 93,000-point mark, marking a new milestone for the country’s economic prospects. The surge in the index reflects growing investor confidence and a positive outlook for Pakistan’s economic future.

The PSX 100 Index crossing the 93,000-point mark represents a new chapter of economic optimism for Pakistan, reflecting investor confidence and resilience.

This historic milestone indicates that Pakistan is on an upward trajectory for economic stability and growth, inspiring trust among local and international investors.

“This historic milestone indicates that Pakistan is on an upward trajectory for economic stability and growth, inspiring trust among local and international investors,” said the Pakistan Stock Exchange in a statement, highlighting the significance of the milestone.

With the PSX reaching record highs, Pakistan is attracting foreign investment, strengthening its capital markets, and setting the stage for sustained economic growth.

The impressive rise in the PSX showcases Pakistan’s untapped economic potential, underscoring an era of modernization and innovation in key industries.

As Pakistan’s stock market booms, sectors such as technology, banking, and manufacturing are benefiting, creating opportunities and employment across the country.

The record-breaking performance of the Pakistan Stock Exchange aligns with the government’s economic reforms, affirming that structural improvements are fostering a stable, investor-friendly environment.

“The impressive rise in the PSX showcases Pakistan’s untapped economic potential, underscoring an era of modernization and innovation in key industries,” said the Pakistan Stock Exchange statement. “This reflects the government’s commitment to creating a favourable environment for business and investment.”

By reaching this historic peak, Pakistan is proving itself to be a promising frontier market, drawing interest from institutional investors worldwide.

The bullish PSX trend reflects growing investor confidence in Pakistan’s infrastructure, energy, and technology sectors, all of which are set to drive future economic expansion.

“By reaching this historic peak, Pakistan is proving itself as a promising frontier market, drawing interest from institutional investors worldwide,” said the Pakistan Stock Exchange.

The PSX’s performance highlights Pakistan’s transformation into a competitive and resilient economy ready to seize new opportunities on the global stage.

With the stock market on an upward trend, Pakistan is better positioned to finance mega-projects in infrastructure and energy, key drivers of sustainable economic growth.

The PSX symbolizes Pakistan’s commitment to reform, attracting investment, and laying the groundwork for a vibrant economic future.

“The PSX symbolizes Pakistan’s commitment to reform, attracting investment, and laying the groundwork for a vibrant economic future,” said the statement.

The continued strength of the Pakistan Stock Exchange is expected to encourage further investment and drive economic growth, demonstrating the country’s potential for a strong and prosperous future.

[Riaz Haq]

IT exports surge to $1.2bn in July-Oct - Business - DAWN.COM


https://www.dawn.com/news/1873376

KARACHI: Despite internet disruptions and firewall issues, Pakistan’s IT exports rose 35 per cent to $1.21bn during July-October 2024-25.

Nasheed Malik of Topline Securities said exports have risen due to IT export companies’ growing client base globally, especially in the Gulf Cooperation Council (GCC) region, relaxation in the permissible retention limit increasing it from 35pc to 50pc in the Exporters’ Specialised Foreign Curr­ency Accounts, and exch­ange rate stability encouraged IT exporters to bring a higher portion of profits back to Pakistan.

IT exports surged 39pc year-on-year and 13pc month-on-month to $330m in October.

These monthly IT exports in October 2024 are higher than last 12-month average of $287mn. This is the 13th consecutive month of YoY IT export growth, starting from October 2023, he said.

He said the MoM increase in IT exports is due to a higher number of working days in October (23) compared to September (20). Export proceeds per day were recorded at $14.3mn for October 2024 versus $14.6mn in September 2024.

Pakistani IT companies are actively engaged with global clients. He added that leading IT companies recently attended Oslo Innovation Week 2024 and the Pak-US Tech Invest­ment Conference.

According to a Pakistan Software Houses Asso­ciation (P@SHA) survey, 62pc of IT companies maintain specialised foreign currency accounts.

Nasheed said a major development in FY25 was SBP adding a new category of Equity Investment Abroad (EIA), specifically for export-oriented IT companies. IT exporters can now acquire interest (shareholding) in entities abroad utilising up to 50pc proceeds from specialised foreign currency accounts.

[Riaz Haq]

Pakistan's textile exports climb 10% to $6.146 billion in first 4 months of FY24-25

https://arynews.tv/pakistans-textile-export-climbs-to-6-146-billion/


ISLAMABAD: Textile exports witnessed an increase of 10.44 percent during the first four months of the current financial year (2024-25) as compared to the corresponding period of last year, Pakistan Bureau of Statistics (PBS) reported.

The textile exports from the country were recorded at US $ 6,146.105 million during July-October (2024-25) against the exports of US $ 5,565.058 million during July-October (2023-24).

The textile commodities that contributed in trade growth included cotton cloth the export of which increased by 5.25 percent to $ 679.427 million from $ 645.535 million while the export of knitwear surged by 18.69 percent to $ 1,759.991 million from $ 1,482.862 million.

The other commodities that witnessed growth in trade included bed wear, the export of which rose by 13.17 percent to $ 1,069.690 million from $ 945.181 million, towels by 5.47 percent to $ 356.461 million from $ 337.987 million, tents, canvas, and tarpaulin up by 7.02 percent to $ 40.412 million this year compared to the exports of $ 37.763 million last year.

Similarly, the export of readymade garments grew by 25.40 percent to $ 1,358.890 million from $ 1,083.679 million, art, silk and synthetic textile rose by 12.26 percent to $ 131.614 million from $ 117,241 million, made up articles (excl. towels and bed wear) increased by 12.46 percent to $ 263.777 million from $ 234.555 million while the export of other textile materials surged by 7.48 percent to $ 252.630 million from $ 235.054 million.

The textile commodities that witnessed negative trade growth included cotton yarn, the exports of which declined by 45.49 percent, from $ 407.564 – million to $ 221.759 million whereas the export of raw cotton dipped by 100 percent from 23.346 million to zero export during the months under review.

Meanwhile, year-on-year basis, the textile exports witnessed an increase of 13.11 percent during October 2024 as compared to the same month of last year. The textile exports from the country during October 2024 were recorded at US $ 1,625.782 million against the exports of US $ 1,437.287 million in October 2023.

On a month-on-month basis, the textile exports from the country however witnessed a nominal decrease of 1.30 percent during October 2024 as compared to the exports of $ 1,604.856 million recorded in September 2024, according to the data.

[Riaz Haq]

Arif Habib Limited
@ArifHabibLtd
Remittances increased by 29% YoY to $ 2.9bn during Nov’24

Remittances by overseas Pakistani's increased by 29% YoY to USD 2.9bn during Nov'24 compared to USD 2.3bn during Nov’23. On MoM basis, remittances decreased by 5%.

In 5MFY25, remittances increased by 34%YoY to USD 14.8bn.

https://x.com/ArifHabibLtd/status/1866091692006244359

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Pakistan's remittances climb by 33.6% to $14.8 billion

https://arynews.tv/pakistans-remittances-climb-by-33-6-to-14-8-bill...

ISLAMABAD: The workers’ remittances increased by 33.6 percent during the first five months of the current fiscal year as compared to the corresponding period of last year, according to latest data of State Bank of Pakistan (SBP) released on Monday.

The remittances reached to US$ 14.8 billion during July-November 2024-25 as against the remittances of US$ 11.1 billion received during July-November 2023-24.

On year-on-year basis, workers’ remittances during November 2024 recorded an inflow of US$ 2.9 billion, posting an increase of 29.1 percent as compared to same month of last year.

Remittances inflows during November, 2024 were mainly sourced from Saudi Arabia ($729.2 million), United Arab Emirates ($619.4 million), United Kingdom ($409.9 million) and United States tof America ($288.2 million).

On December 6, he State Bank of Pakistan (SBP) witnessed a surge in the foreign exchange reserves with a reported increase of $620 million.

The State Bank of Pakistan in a statement said that “the total foreign reserves of Pakistan surged to US$16.62 billion supported by recent Asian Development Bank (ADB) loan transfer, while the SBP reserves crossed $12 billion as of November 29, 2024.”

According to the SBP, the total liquid foreign exchange reserves held by the central bank, increased by $620 million to $12,038.3 million after the official inflow of $500 million from ADB.

The SBP has received $500 million from Asian Development Bank (ADB) for the Climate Change and Disaster Resilience Enhancement Program (CDREP) as a policy-based loan to support disaster risk reduction and resilience in Pakistan

[Riaz Haq]

Pakistan stocks near 110,000-mark amid strong liquidity, interest rate cut hopes

https://www.arabnews.com/node/2582359/business-economy

Market closed at 916.43 points up, or 0.84%, to stand at 109,970.38 points from the previous close of 109,053.95
State Bank has slashed interest rates by 700 basis points in four consecutive meetings since June, bringing rate to 15%
ISLAMABAD: The Pakistan Stock Exchange (PSX) crossed 110,000 points during intraday trade on Monday to settle at 109,970.38 points at closing, amid strong liquidity available in the market and on the hopes of an interest rate cut next week, analysts said.
The benchmark KSE-100 index closed at 916.43 points up, or 0.84%, to stand at 109,970.38 points from the previous close of 109,053.95. The stock exchange had gained more than 1,000 points to reach 110,264 points at noon on Monday. This was the 9th consecutive session when shares at the market traded in green.

Analysts credit the rally to strong liquidity available with mutual funds as investors convert from fixed-income instruments to equities amid a reduction in interest rates.
“The longevity of the rally will likely depend on delivery of structural reforms such as efforts to broaden the tax net, energy reforms, state-owned enterprises,” Raza Jafri, chief executive officer of the Karachi-based EFG Hermes brokerage house, told Arab News.
“So far the government appears committed to delivering reforms which is positive, but eventually the talk will have to translate into action.”
Pakistan slashed interest rates by 250 basis points in November to help revive a sluggish economy, amid a major drop in the annual inflation rate. The State Bank has already slashed interest rates by 700 basis points (bps) in four consecutive meetings since June, bringing the rate to 15%.
According to a poll conducted by Topline Securities, 71% of participants expect the central bank will announce a minimum rate cut of 200bps at the upcoming Monetary Policy Committee meeting on Dec. 16.
Ahsan Mehanti, CEO of Arif Habib Corporation, attributed the bullish trend at the PSX to falling lending rates and speculation about another major policy rate cut by the central bank this week.
“Rupee’s stability on surging foreign exchange reserves and upbeat economic indicators played a catalyst role in the record surge at market,” he added.
Annual consumer inflation also slowed to 4.9% in Pakistan in November, lower than the government’s forecast, largely due to a high base a year earlier. It cooled from 7.2% in October, a sharp drop from a multi-decade high of nearly 40% in May 2023.

[Riaz Haq]

Pakistan’s textile exports surge 10% in 4MFY25 - Profit by Pakistan Today

https://profit.pakistantoday.com.pk/2024/11/15/pakistans-textile-ex...

Overall, the country’s total exports for the 4MFY25 period amounted to $10.889 billion (provisional), marking a 13.55% rise from $9.590 billion in the corresponding months of the previous year. Exports in October 2024 reached $2.984 billion, reflecting a 5.22% increase from $2.836 billion in September 2024, and a 10.97% rise compared to $2.689 billion in October 2023.

The textile sector continued to lead the export growth, with textile group exports increasing by 13.11% in October 2024, totaling $1.625 billion compared to $1.437 billion in October 2023. On a month-on-month (MoM) basis, textile exports saw a slight 1.30% rise from $1.604 billion in September 2024.

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Pakistan records $349mn current account surplus in October 2024 - Markets - Business Recorder

https://www.brecorder.com/news/40333045


Overall, the figure takes Pakistan’s current account to a surplus of $218 million in the first four months of the current fiscal year (4MFY25), in contrast to a massive deficit of $1.528 billion in the same period of the previous fiscal year.

Breakdown

In October 2024, the country’s total export of goods and services amounted to $3.711 billion, up nearly 12% as compared to $3.327 billion in the same month of the previous year

Meanwhile, imports clocked in at $5.558 billion during October 2024, a jump of nearly 7% on a yearly basis, according to SBP data.

Worker remittances clocked in at $3.052 billion, an increase of 24% as compared to the previous year.

Low economic growth along with high inflation have helped curtail Pakistan’s current account deficit with an increase in exports also helping the cause. A high interest rate and some restrictions on imports have also aided the policymakers’ objective of a narrower current account deficit.

4MFY25

In 4MFY25, the country’s total export of goods and services amounted to $13.11 billion. Whereas, imports clocked in at $22.43 billion during the period, according to SBP data.

The country’s worker remittances clocked in at $11.85 billion, an increase of nearly 35% as compared to $8.79 billion in same period last year.

The current account is a key figure for cash-strapped Pakistan which relies heavily on imports to run its economy.

A widening deficit puts pressure on the exchange rate and drains official foreign exchange reserves, while the situation reverses vice versa.

[Riaz Haq]

In 2024, remittance flows to low- and middle-income countries are expected to reach $685 billion, larger than FDI and ODA combined

https://blogs.worldbank.org/en/peoplemove/in-2024--remittance-flows...

Officially recorded remittances to low- and middle-income countries (LMICs) are expected to reach $685 billion in 2024. The true size of remittances, including flows through informal channels, is also believed to be even larger. The growth rate of remittances in 2024 is estimated to be 5.8 percent, significantly higher than 1.2 percent registered in 2023

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The top five recipient countries for remittances in 2024 are India, with an estimated inflow of $129 billion, followed by Mexico ($68 billion), China ($48 billion), the Philippines ($40 billion), and Pakistan ($33 billion) (figure 1). In smaller economies, remittance inflows represent very large shares of gross domestic product (GDP), highlighting the importance of remittances for funding the current account and fiscal shortfalls. Topping the list is Tajikistan (45 percent of GDP), followed by Tonga (38 percent), Nicaragua (27 percent), Lebanon (27 percent), and Samoa (26 percent) (figure 2).
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The recovery of the job markets in the high-income countries of the Organization for Economic Co-operation and Development (OECD), following the onset of the COVID-19 pandemic, has been the key driver of remittances. This is especially true for the United States where the employment of foreign-born workers has recovered steadily and is 11 percent higher than the pre-pandemic level seen in February 2020 (see figure 3). By contrast, the employment level of native-born workers has recovered to the same level as before the pandemic. A similar pattern is seen in the case of Hispanic workers, which is a key factor for the strength of remittance flows to the Latin America and the Caribbean region.

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By region, remittance flows to South Asia is expected to register the highest increase in 2024, at 11.8 percent (figure 4), driven mainly by continued strong flows to India, Pakistan, and Bangladesh. Remittances to the Middle East and Africa is estimated to have increased 5.4 percent, primarily due to rebounded flows to Egypt, compared with a 14.6 percent decline in 2023.

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It is notable that remittances have continued to outpace other types of external financial flows to low- and middle-income countries. Remittances have even surpassed FDI significantly (figure 5). The gap between remittances and FDI is expected to widen further in 2024. During the past decade, remittances increased by 57 percent, while FDI declined by 41 percent. Remittances will likely continue to increase because of enormous migration pressures driven by demographic trends, income gaps, and climate change. Therefore, countries need to take note of the size and resilience of remittances and find ways to leverage these flows for poverty reduction, financing health and education, financial inclusion of households, and improving access to capital markets for state and nonstate enterprises.

[Riaz Haq]

Arif Habib Limited
@ArifHabibLtd
The KSE100 2025 forward PE ratio of 5.9x is still substantially below the 10-year average P/E of 8.2x.

This discount signals a sharp undervaluation of the index, suggesting that the market has 40% room for appreciation to 153k points when it aligns closer to historical valuation multiples.

https://x.com/ArifHabibLtd/status/1870368354730389748