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]

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KSE100 Index recorded its highest-ever closing at 82,722

KSE-100 index went up by 755 points (+0.92% DoD) to close at 82,722 pts.

https://x.com/ArifHabibLtd/status/1841801335013859417

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Arif Habib Limited
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AHL reported that this surge in sales is attributed to rising demand alongside a notable decline in the prices of Motor Spirit (MS) and High-Speed Diesel (HSD), which fell by 20.19% and 20.06% year-on-year, respectively.

https://x.com/ArifHabibLtd/status/1841701062866051564

Petroleum product sales surge 20% in September fueled by increased demand

https://profit.pakistantoday.com.pk/2024/10/02/petroleum-product-sa...

Pakistan's petroleum consumption hits 1.27 million tons, driven by falling prices and robust petrol and diesel offtake

Petrol sales saw a remarkable 22% year-on-year rise, totaling 0.63 million tons in September 2024, up from 0.52 million tons the previous year. Meanwhile, HSD dispatches surged by 25% year-on-year, reaching 0.49 million tons in the same month.

Conversely, Furnace Oil (FO) sales experienced an 18% decline, dropping to 0.07 million tons due to diminished demand for FO in power generation, compared to 0.08 million tons in September last year.

On a month-on-month basis, petroleum product offtake increased by 5% from August’s 1.22 million tons, attributed to lower demand in August due to heavier rainfall.

For the first quarter of FY25, total petroleum product sales fell by 3% year-on-year to 3.68 million tons, compared to 3.81 million tons in the same period last year. While sales of HSD and FO declined, petrol sales remained stable, with volumes recorded at 1.85 million tons for petrol, 1.42 million tons for HSD, and 0.21 million tons for FO.

Company-wise, Pakistan State Oil (PSO) reported an 8% increase in offtake for September 2024, totaling 0.55 million tons. Additionally, HASCOL and Shell Petroleum saw substantial growths of 76% and 17% year-on-year, respectively, while Attock Petroleum Limited (APL) experienced an 8% decline in dispatches.

[Riaz Haq]

Pakistan Finance Chief Sees ‘Encouraging’ China Debt Talks

https://www.bnnbloomberg.ca/business/international/2024/10/22/pakis...

(Bloomberg) -- Pakistan is getting a promising response from China over its request to lengthen maturities for Belt and Road Initiative loans, according to its finance minister, signaling potentially more breathing room for the nation that has been squeezed by costly past borrowing.The South Asian nation is looking to increase the maturities for debt taken to build power plants and “create enough space” to lower electricity prices, Muhammad Aurangzeb said in an interview in Washington. Electricity prices have tripled for some people in Pakistan in the past few years and surpassed house rent for some.“We have just started that discussion and the response is encouraging,” Aurangzeb said Tuesday on the sidelines of the annual meetings of the International Monetary Fund and World Bank. “These are early days in terms of those negotiations. The former JPMorgan Chase & Co. banker discussed debt with Chinese officials during a visit to the country in July. Pakistan is seeing a period of stability after securing a new $7 billion loan program from the IMF. It has also seen partners including China roll over debt of $16 billion from a total of about $26 billion due in the current fiscal year that started in July. The government also plans to initiate discussions on obtaining additional financing from the IMF through its climate resiliency fund, he said.Having gone through 25 loan programs over half a century, the South Asian nation must institute durable reforms in the key areas of tax collection, energy sector and state-owned enterprises to end a cycle of indebtedness, the finance minister said separately at an IMF forum later in the day.
“We’ve had so many programs. We’ve had boom and bust cycles,” Aurangzeb said. “We do not have a choice but to ensure that we continue with the structural reforms.” He added that the government knows it has no business being in business and that it must provide an enabling environment to support the private sector. It also aims to shrink government costs by cutting the number of ministries and closing 150,000 federal positions.To boost tax revenue, Pakistan will target sectors including retail and agriculture that have opposed previous attempts at taxation. The nation’s provinces will move forward on legislation on the agriculture side by January and aim to start collection by July, the finance chief said in the interview with Bloomberg.The country has been a flagship destination for China’s Belt and Road Initiative of lending to developing countries that helped the nation end its decades-long electricity blackout issues. Now its seeking to extend the maturity of debt for nine power plants built by Chinese companies under the multibillion-dollar economic corridor. Pakistan’s period of stability has seen consumer price increases decelerate to the lowest in almost four years. Pakistan’s short-term local government bonds are set for their first annual inflow from foreign investors in five years, buoyed by high yields and a stable rupee. The benchmark stock index has risen 70% in the past 12 months, making it the world’s best performer.Pakistan’s central bank has cut its benchmark interest rate for three consecutive meetings by 450 basis points to 17.5% from a record 22%. The next meeting on Nov. 4 may see the central bank reduce the policy rate, said Aurangzeb.

[Riaz Haq]

Arif Habib Limited
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KSE-100 index hits record high, surpasses 88,000 Mark

oThe KSE-100 Index surged by 1,751 points (+2.01%) today, closing at a historic high of 88,946 points. This marks the fifth-largest one-day points gain in the index's history.

oThe remarkable performance brings the index's CY24TD gain to an impressive 42.4%, and MoM gain of 9.7%.

https://x.com/ArifHabibLtd/status/1849420372111687855

[Riaz Haq]

Remittances to hit $35bn in FY25: Finance Minister
Aurangzeb says market forces are determining exchange rate

https://www.brecorder.com/news/40336408

KARACHI: Finance Minister Muhammad Aurangzeb on Saturday said the inflows of workers’ remittances are expected to hit an all-time high of $35 billion in the current fiscal year 2024-25, compared to $30.25 billion registered in FY24.

Talking to media persons at the Overseas Investors Chamber of Commerce and Industry (OICCI) in Karachi, the finance minister said state-owned entities (SOEs) are costing the national exchequer a loss of Rs2.2 billion per day.

“We have sustained losses to the tune of Rs6 trillion in the last 10 years, which comes to around 50% of the revenue collection target set at Rs12.9 trillion for FY25,” he said.

Investment, growth and credit safety: Aurangzeb pledges robust insolvency regime

Aurangzeb believed that the government sees controlling these losses through privatisation.

“Privatisation, liberalisation and deregulation are the way forward.”

The former banker shared that foreign companies operating in Pakistan have sent profit and dividends worth $2.2 billion in May-June 2024, clearing the entire backlog of the repatriation.

“Now there is no restriction on sending the repatriation from the Ministry of Finance and State Bank of Pakistan (SBP). This is now up to commercial banks to facilitate the foreign companies in continuing to send profit and dividends without any delay,” he maintained.

Pakistan moving on path of economic stability: Aurangzeb

Answering a query, Aurangzeb said the rupee-dollar parity depends on the demand and supply of the greenback in the market, while market forces are determining the exchange rate instead of the government.

Aurangzeb said the government has prioritized inviting Foreign Direct Investment (FDI) in export-led projects and increasing exports to achieve sustainable economic growth.

“Whenever our economy hit 4% growth rate, the issues of widening current account deficit (CAD) and balance of payment arise, as we are running an import-led economy,” he said.

The finance minister, however, did not respond to the question of when Pakistan would surpass the 4% growth rate.