Pakistani Stock Market is the World's Best Performing Market in 2024

[Riaz Haq]

Pakistan's KSE-100 shares index topped 80,000 points on Wednesday as stocks climbed more than 600 points, making it the world's best performing stock market. The benchmark KSE-100 index has posted an annual return of 89% during FY24 (July 2023-June 2024) in PKR terms while in US dollar terms, the return was 94%, as the Pakistani rupee appreciated against the US dollar, according to Pakistani media reports.  This outstanding market performance is generally being seen as a consequence of a series of unpopular decisions  by the military-backed government of Prime Minister Shahbaz Sharif to carry out economic reforms to win the IMF support. 

Pakistani Stock Market Outperforms Asian Peers. Source: Bloomberg

Specifically, some analysts attribute the record increase in Pakistani share prices to multiple factors, ranging from the government's investor-friendly budget to the expectation of closing a longer term IMF deal. Others believe the relatively low price-earnings (P/E) multiples of Pakistani stocks make them attractive to investors. 

Awais Ashraf, director of research at AKD securities, attributed the stocks upward momentum to “expected entry into the larger IMF program and expected monetary easing boosting investor confidence in equities”, according to Dawn newspaper. 

“The majority increase in return is attributed to re-rating of Price to Earning (PE) from 2.2-2.4x in June 30, 2023 to 3.94x in Jun 28, 2024,” said a Pakistani investment firm Topline Securities in its report. It attributed the PE multiple re-rating to “improving economic indicators, i.e. increase in exports and remittances by 11% and 9%, respectively in 11MFY24, decline in inflation from peak of 38.0% in May-23 to 11.8% in May 2024.”

Foreign portfolio investors are coming back to Pakistan’s debt and equity markets after a prolonged absence, marking a significant shift in market sentiment, according to a report in The Express Tribune newspaper. The short-term external investment has surged by a remarkable 84%, catapulting to a 30-month high, now standing at Rs 501.30 billion (US$ 1.8 billion) .

There is a distinct difference in how the new budget, compliant with the IMF requirements, has been received by the ordinary public compared to the investor class. Higher taxes on consumption in the new budget have angered most consumers but the prospects of  lower fiscal deficits and significant macro-economic improvements are generally being welcomed by investors. The government, backed by the Pakistani military, sees the need to improve the macro-economic indicators as essential to improving the long-term health of the national economy. 

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[Riaz Haq]

Pakistan clinches IMF bailout deal, to raise tax on farm income | Reuters


https://www.reuters.com/markets/asia/pakistan-shares-hit-fresh-reco...

The new agreement introduced increased tax on agricultural incomes, underscoring the need to increase government revenue and reduce recurrent deficit to win the lender's approval.
The IMF said it had got assurances from Pakistani authorities - provincial and federal - that they would bring taxation on agricultural incomes on par with corporate and other tax rates.
Agricultural income has historically been taxed much lower than other sectors, despite contributing 23% to the GDP, employing 35% of the labour force, and bringing in an annual income of around 9 trillion Pakistani rupees ($32.37 billion).
Under the IMF deal, the highest effective tax rate can rise to as much as 45% from the current 15%. It will be implemented from 2025, a move that was termed "unprecedented" by brokerage and investment banking firm JS Global.
"These changes could contribute to inflation, particularly in food prices, affecting consumers nationwide," said Ghasharib Shaokat, head of product at Pakistan Agriculture Research, adding that larger farmers will be affected more.
Inflation averaged close to 30% in FY23 and 23.4% in FY24, which ended on June 30.
Policymakers have long wanted to do this, but were unable because Pakistani governments do not want to risk their popularity among the rural voter base, said Vaqar Ahmed of the Sustainable Development Policy Institute, a think tank.
"Most of the good reforms for fiscal consolidation, unfortunately, have not come as a result of our own political will and have come as a result of external push," he said.

Prime Minister Shehbaz Sharif's government is also based on a weak coalition and faces political pressure of a popular jailed opposition leader, former premier Imran Khan.
But Sharif says his government is committed to tough but unavoidable reforms.
Pakistan has been struggling with boom-and-bust cycles for decades, leading to 22 IMF bailouts since 1958. Currently the IMF is fifth-largest debtor, owing $6.28 billion as of July 11, according to the lender's data, opens new tab.
The latest economic crisis has been the most prolonged and has seen the highest ever levels of inflation, pushing the country to the brink of a sovereign default last summer before an IMF bailout.
The conditions of the programme have become tougher. The latest bailout is aimed at cementing stability and inclusive growth in the crisis-plagued South Asian country, the IMF said.
A source close to negotiations with the IMF told Reuters that the agriculture income tax was agreed weeks ago, but was deliberately not highlighted by the government because of the sensitivity of the matter.
The IMF has said the SLA agreement is subject to approval by its executive board and the confirmation of necessary financing assurances from Pakistan's development and bilateral partners.
This would include rollovers or disbursements on loans from Pakistan's long-time allies Saudi Arabia, the United Arab Emirates and China.
($1 = 278.0000 Pakistani rupees)

[Riaz Haq]

‘Pakistan’s coalition govt to last just 18 months’ amid political turmoil: Fitch report

https://pakobserver.net/pakistans-coalition-govt-to-last-just-18-mo...

American credit rating agency Fitch shared a worrisome report about Pakistan’s current political instability that could hinder economic recovery.

In its latest Country Risk Report, Fitch Business Monitor International highlighted the critical condition of Pakistan’s economic recovery, pointing out that political turmoil will affect economic activities.

The report pointed out unstable political situation, with Pakistan Tehreek-e-Insaaf (PTI) founding chairman and former Prime Minister Imran Khan expected to remain behind bars despite legal victories.

It said the PML-N led coalition government will remain in power for next 18 months, with no immediate plans for new elections. Fitch also mentioned a potential scenario where a technocratic administration could take over if the government changes.

This implies that Pakistan will continue to implement IMF-mandated reforms, enabling the economy to grow by 3.2% in 2024/25. The report projects that the policy rate could reach 16 percent this fiscal year and 14 percent next year, while the exchange rate has stabilized beyond expectations.

USD is expected to reach Rs 290 by the end of this year and Rs 310 next year, the report said. Achieving budget targets under the IMF program is considered challenging, although the fiscal deficit is expected to decrease from 7.4 percent to 6.7 percent, it added.

Fitch also warned that another flood or natural disaster could significantly threaten the already fragile economy.

[Riaz Haq]

Pakistan’s current account posts deficit of $681mn in FY24 - Markets - Business Recorder

https://www.brecorder.com/news/40313476

Pakistan’s current account posted a deficit of $681 million in FY2023-2024, massively lower by 79% than the deficit of $3.275 billion in the previous fiscal year, revealed data released by the State Bank of Pakistan (SBP) on Friday.

The CAD amounts to 0.2% of GDP, which is the lowest in the last 13 years, said brokerage house Arif Habib Limited (AHL).

“This significant decline was driven by a 6% reduction in the trade deficit and an 11% increase in remittances,” it added.

In FY24, the country’s total export of goods and services amounted to $38.9 billion. Imports clocked in at $63.3 billion during the period, according to SBP data.

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Pakistan's IT exports up by 24% to $3.2bn in FY24 - Profit by Pakistan Today

https://profit.pakistantoday.com.pk/2024/07/19/pakistans-it-exports...

Pakistan's IT exports surge by 24% to reach US$3.2 billion in FY24. In a significant economic development, Pakistan's Information Technology (IT) exports have soared to US$3.2 billion in the fiscal year 2024, marking a robust 24% year-on-year increase from the previous fiscal's US$2.59 billion.

The latest data, released by the State Bank of Pakistan, underscores the sector’s resilience and growth amidst global economic challenges.

For June 2024 alone, Pakistan recorded IT exports worth $298 million, up by 33% compared to the same period last year. Despite a month-on-month decline of 10%, June’s exports surpassed the twelve-month average of $262 million, highlighting sustained momentum in the sector.


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FY24 exports soar 10.54pc to $30.645bn YoY - Business & Finance - Business Recorder

https://www.brecorder.com/news/40310979

ISLAMABAD: The country’s exports increased by 10.54 percent ($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, says the Pakistan Bureau of Statistics (PBS).

The monthly trade data released by the Bureau noted that Pakistan’s trade deficit narrowed down by 12.32 per cent in the fiscal year 2023-24 as it stood at $24.089 billion compared to $27.474 billion during the fiscal year 2022-23.

Imports declined by 0.84 per cent to $54.734 billion during the fiscal year 2023-24 as compared with $55.198 billion in the fiscal year 2022-23.

The data further noted that the trade deficit widened by 30.39 per cent on a year-on-year basis and stood at $2.390 billion in June 2024 compared to $1.833 billion during the same month of 2023.

The imports increased by 17.43 per cent on a YoY basis and remained $4.919 billion in June 2024 compared to $4.189 billion in June 2023. The exports increased by 7.34 per cent on a YoY basis and remained $2.529 billion in June 2024 compared to $2.356 billion in June 2023.

On a MoM basis, the trade deficit widened by 15.13 per cent to $2.390 billion in June 2024, as compared to $2.076 billion in May 2024. Exports recorded a 10.92 per cent negative growth to $2.529 billion in June 2024 when compared with $2.839 billion in May 2024.

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Remittances in FY24 - BR Research - Business Recorder

https://www.brecorder.com/news/40313433

Remittances to Pakistan grew by 10.7 percent year-on-year in FY24 to $30.3 billion. The annual tally is the second highest in the country’s history at $30.3 billion in FY24 after $31.2 billion in FY22. Remittances during June 24, the last month of the fiscal year stood at $3.16 billion, up by 44 percent on a year-on-year basis, but down by 3 percent on a month-on-month basis.

[Riaz Haq]

Pakistan's domestic exports rose by 8.90% in FY2023-24

https://www.samaa.tv/2087319468-pakistan-s-domestic-exports-rose-by...

In the fiscal year 2023-24, Pakistan's domestic exports saw a notable increase of 8.90%, reflecting a positive trend in the country's trade performance.

The total exports of goods and services surged by $3.16 billion compared to the previous fiscal year, bringing the total export volume to $38.48 billion.

Breaking down the figures, the export of goods reached $30.68 billion, while services exports amounted to $7.80 billion. The export of goods experienced an annual increase of $2.95 billion, whereas the services sector saw a more modest rise of $210 million.

The textile sector remained a significant contributor, with exports totalling $16.65 billion. The agro and food sector also performed well, recording exports of $7.37 billion. Additionally, manufacturing and engineering exports crossed the $4 billion mark, showcasing the sector's growth and potential.

According to the Ministry of Commerce, other sectors contributed $2.22 billion to the total export volume, highlighting the diverse range of products and services that Pakistan offers to the global market.


Meanwhile, in the first month of the current financial year, Pakistan witnessed a sharp increase in car imports, while smartphone imports took a downturn, according to the latest report from the Pakistan Bureau of Statistics (PBS).

Car imports more than doubled in July 2024, with vehicles worth $23.29 million ordered during the month. The value of these imported cars in local currency amounted to approximately Rs6.45 billion.


In addition to this surge in car imports, car assembly operations also saw a rise, with parts worth $34.2 million being imported in July 2024. The value of these parts in local currency was over Rs9.5 billion, indicating robust demand for both fully built units (CBUs) and completely knocked down (CKD) car kits.

This trend is notable as Pakistan continues to see increasing demand for automobiles, even amidst economic challenges and inflationary pressures. Industry analysts suggest that a growing middle class and increased consumer financing options may be driving the growth in car imports.

However, the same cannot be said for smartphone imports. In contrast to the car sector, smartphone imports saw a decline of 5.3% in July 2024 compared to the same period last year. Smartphones worth $64.5 million were imported last month, a sharp contrast to July 2023 when mobile phone imports amounted to $68.1 million.

[Riaz Haq]

Pakistan Stocks Near Record High After Biggest Foreign Buying in a Decade – BNN Bloomberg


By Chiranjivi Chakraborty and Faseeh Mangi

https://www.bloomberg.com/news/articles/2024-09-19/pakistan-stocks-...

(Bloomberg) -- Stocks in Pakistan closed near their record high on Thursday as robust foreign inflows and improving macro-economic indicators boosted sentiment.Pakistan Stock Exchange’s benchmark KSE-100 index gained 1.1% to close just shy of the previous record of 81,865.10, after touching a new high earlier in the day. The gauge has risen more than 30% this year, aided by foreign investors’ net purchases of $87 million in local shares, the highest since 2014, data compiled by Bloomberg showed. Pakistan’s stock market has been one of the best performers globally this year, buoyed by improving economic outlook and a crucial initial loan deal with the International Monetary Fund in July. In recent months, the nation’s current account balance has improved, and the central bank has slashed interest rates as inflation is easing.That said, the rally faces risks going forward. Pakistan was downgraded to a frontier market status from secondary emerging market by FTSE Russell in July, with the decision coming into effect from Sept. 23. Vanguard Group Inc., which provides investment management and advisory services, is cumulatively holding as much as $160 million worth of Pakistan stocks, and is expected to trim holdings ahead of the new status, Topline Securities Ltd. said in a note this week.
For some market watchers, the stocks still have more room to run, driven by fertilizer and energy shares.Pakistan is still “very cheap for foreign investors” and those investments will continue, more so after the interest-rate cut by the Federal Reserve, said Aqeel Karim Dhedhi, chairman at the AKD Group that includes one of the nation’s largest brokerage houses.©2024 Bloomberg L.P.

[Riaz Haq]

86 top companies post record Rs1.7 trillion profit
Despite inflation, high interest rates, and poor output, profits soar by 25% in FY24

https://tribune.com.pk/story/2498512/86-top-companies-post-record-r...

Pakistan's top 86 companies, listed on the national stock market, have posted a record net profit of Rs1.7 trillion for the fiscal year ending June 30, 2024, marking a 25% increase despite tough economic conditions, including high inflation, record interest rates, and brief rupee devaluation.

The historic growth in profitability in some large-scale manufacturing industries, including cement, fertiliser, automobile, and chemical sectors at the Pakistan Stock Exchange (PSX), contrasts with their poor volumetric output reported by the Pakistan Bureau of Statistics (PBS). This suggests that these industries sold fewer goods at significantly higher prices, allowing them to navigate the economic crisis.

According to a comprehensive report by Topline Research titled "Pakistan Strategy – Record Corporate Profitability in FY24; Earnings Up 25% YoY; Dividend Up 30% in FY24," net profitability in US dollar terms rose by 10%, reaching $5.8 billion compared to FY23.

The earnings surge was primarily led by the banking sector, which posted Rs591 billion in profits, up 35% year-on-year. The fertiliser sector followed with Rs168 billion in net profit, marking a 75% increase, while the cement sector earned Rs115 billion, rising 38% compared to FY23.

Notably, the PSX was the world's best-performing market in FY24, as the benchmark KSE-100 Index soared by 89%, reaching a record high of 78,445 points, up from 41,453 at the start of the fiscal year. The index hit an intra-day record high of 81,850.5 points in recent weeks, closing at 81,484 points on Tuesday.

Topline Research highlighted that banking sector earnings, which accounted for 36% of the KSE-100 index's total profitability, were driven by higher Net Interest Income (NII), bolstered by elevated interest rates throughout the year. The central bank maintained its key policy rate at a record high of 22% from June 2023 to June 2024, before cutting it by 450 basis points to the current 17.5%.



Fertiliser sector profitability surged by 75%, reaching Rs168 billion, thanks to a 2% increase in urea offtake, a 40% rise in DAP sales, and significant price hikes of 59% for urea and 9% for DAP.

The cement sector saw a 38% increase in profits to Rs115 billion, driven by higher retention prices and lower coal costs, despite a decline in local demand.

Other sectors, such as chemicals, engineering, and refineries, experienced slower earnings growth in FY24, with profitability rising by 38%, 27%, and 25%, respectively. The technology sector reported a loss of Rs5.7 billion, primarily due to losses incurred by Pakistan Telecommunication Company (PTC).

The pharmaceutical sector, however, witnessed a 71% increase in profitability, reaching Rs10 billion, up from Rs6 billion in FY23, mainly due to improved margins following the deregulation of non-essential products and reduced finance costs.

Topline Research analysed 86 companies out of the KSE-100, representing 95% of the market capitalisation.

Firms distribute Rs666 billion in dividends

The top 86 companies announced a combined cash dividend of Rs666 billion in FY24, up 30% from Rs512 billion in FY23. This translates to a 40% dividend payout in FY24, compared to 39% in the previous year.

The payout ratio for the oil and gas exploration (E&P) sector increased from 21% in FY23 to 27% in FY24, as companies saw improved cash flows due to higher gas prices. The banking sector's payout ratio also rose from 42% in FY23 to 47% in FY24, thanks to record profitability.


The banking sector remained the largest contributor to dividends, distributing Rs278 billion, followed by the oil and gas exploration sector with Rs118 billion, and the fertiliser sector with Rs90 billion.

[Riaz Haq]

Arif Habib Limited
@ArifHabibLtd
#IPO of BF Biosciences Limited, #Pakistan's pioneering biotech manufacturing facility.
BF Biosciences is a joint venture between Ferozesons Laboratories Limited and Bago Group of Argentina specializing in the manufacture of Hepatitis and Oncology medicines.

• Registration Dates: 23rd - 26th Sep
• Book Building Dates: 25th & 26th Sep
• Floor Price: PKR 55/- per share
• Offer Shares: 25 million
• Transaction Size: PKR 1,375 million - PKR 1,925 million
• EPS (FY24): PKR 5.86
• P/E at floor: 9.38 x (trailing)

The Company will utilize IPO proceeds for the purchase of plant & machinery, acquire export certifications and procure raw and packing materials, for managing working capital needs
The group has agreements with number of international partners including Gilead Sciences, Inc, Boston Scientific and Bago Group.

https://x.com/ArifHabibLtd/status/1838547366007443734

[Riaz Haq]

IMF board approves $7bn Extended Fund Facility for Pakistan: PMO - Business - DAWN.COM


https://www.dawn.com/news/1860850

The International Monetary Fund’s board (IMF) on Wednesday approved a $7 billion Extended Fund Facility (EFF) for Pakistan, providing a critical boost to the country’s struggling economy.

The development was announced by the Prime Minister’s Office (PMO) while a statement is expected from the IMF. The PMO said the premier expressed his satisfaction with the programme’s approval.

“The implementation of economic reforms is going on rapidly,” he said, adding that the government would continue to work hard to achieve goals related to economic development after achieving economic stability.



The prime minister said the increase in business activities and investment in the country was “welcome and a testament to the hard work of the economic team”.

“Along with the successes on the diplomatic front, the increase in remittances from Pakistanis living abroad is a reflection of their confidence in the government’s policies,” he said, adding that the government was grateful to the Pakistani community.

“If the same hard work continues, God willing, this will be Pakistan’s last IMF programme,” PM Shehbaz said.

The premier thanked Saudi Arabia, China, and the UAE for their support regarding the package, as well as IMF Managing Director Kristalina Georgieva and her team.

Speaking to reporters in New York, PM Shehbaz expressed optimism, reiterating his hope that this would be Pakistan’s final IMF-backed programme. “We are committed to ensuring this is the last time we seek such financial support from the IMF,” he said.

Ahead of the board’s approval, he assured the nation that the IMF agreement was in its final stages. “The IMF had set stringent conditions, and we have fulfilled them all,” he said, crediting China for its continued support and expressing gratitude to Saudi Arabia and the UAE for their essential contributions.

PM Shehbaz acknowledged the economic difficulties faced by his government when it took office but expressed confidence that the country was moving toward recovery. “With the grace of God and the combined efforts of the government and all institutions, we have overcome significant challenges,” he said.

Citing recent assessments by global rating agencies, the prime minister pointed to gradual improvements in key economic indicators, suggesting that Pakistan’s financial outlook was beginning to improve.

Primary goals of new deal
The primary goals of the new bailout package include stabilising Pakistan’s economy by consolidating public finances, rebuilding foreign exchange reserves, and reducing fiscal risks from state-owned enterprises. The programme also aims to create a more conducive environment for private-sector-led growth.

The loan deal, finalised in July, was contingent on Pakistan securing $12bn in financial commitments from key allies such as Saudi Arabia, China, and the UAE.

Pakistan secured $5bn in deposits from Saudi Arabia, $4bn from China, and $3bn from the UAE. An additional condition from the IMF required Pakistan to obtain $2bn in external funding from bilateral and commercial sources.

The remaining financing gap of $2-2.5bn was bridged through various means, including Saudi Arabia’s oil facility, a $400 million loan from the International Islamic Trade Finance Corporation (ITFC) and contributions from Middle Eastern commercial banks, such as Standard Chartered Bank.

The fears of approval were laid to rest after the State Bank Governor Jameel Ahmad said that Pakistan planned to raise up to $4bn from banks by the next fiscal to plug the gap. According to him, Pakistan was in the “advanced stages” of securing $2bn in additional external financing required for IMF approval.

Pakistan has long relied on IMF programmes to avoid default, frequently turning to financial assistance from friendly nations to meet IMF requirements.

[Riaz Haq]

IMF's $7 billion bailout sends Pakistan stocks to new peak
By Gibran Naiyyar Peshimam and Asif Shahzad

https://www.reuters.com/markets/asia/imfs-7-billion-bailout-sends-p...

IMF approves $7 billion bailout for Pakistan
Pakistan's stock index hits record high of 82,905.73
PM Sharif and IMF's Georgieva emphasize need for reforms
ISLAMABAD, Sept 26 (Reuters) - Pakistan's benchmark share index (.KSE), opens new tab hit a life-time high in opening trade on Thursday, hours after the International Monetary Fund's board approved a long-awaited $7 billion bailout deal for the struggling economy.
The IMF said the new programme will require "sound policies and reforms" to strengthen macroeconomic stability and address structural challenges alongside "continued strong financial support from Pakistan's development and bilateral partners".

An immediate disbursement of about $1 billion will take place, an IMF statement said.
Pakistan's stock benchmark index rose in early trade to a record high of 82,905.73 points, before reversing those gains later in the day to close 0.7% down at 81,657.
"We will need to take difficult decisions if we want to make it our last programme with the IMF," Pakistan's junior finance minister, Ali Pervaiz Malik, told local Geo News TV on Thursday.

Prime Minister Shehbaz Sharif thanked the IMF managing director Kristalina Georgieva and said the country would continue to implement the tough economic reform agenda, he told reporters in New York on the sidelines of United Nations general assembly on Wednesday.
Georgieva congratulated Pakistan for moving forward with "home-defined" reforms.
"The economy is on the sound path," she told reporters after the board meeting. "Growth is up and inflation is down," she said.
Islamabad had been working on implementing conditions, which Sharif had previously called "strict" to secure the 37-month loan programme agreed in July. One condition was to secure additional external financing, which the country was struggling to do.
Local media reported that Islamabad recently signed its most expensive commercial loan ever for $600 million at 11% interest as a last-ditch bid to cover the financing gap and secure board approval.

[Riaz Haq]

farrukh saleem
@SaleemFarrukh
1.PSX had a return of 80%
2.Interest rate is down 2%
3.Petrol price is down by Rs57/liter
4.Inflation is down from 37% to 9.5%
5.Sovereign credit worthiness has gone up a notch
6.IMF on track
7.Exports up $3B
8.$12B rollover done

https://x.com/SaleemFarrukh/status/1836725188643454998