Pakistan Stock Market Among World's Best Performers in 2024

[Riaz Haq]

Pakistan's KSE-100 index soared 86% in 2024, making it the second best among major indexes, according to Bloomberg News. The 2024 performance of KSE-100 represents its best year since 2002 when it shot up 112%. The top 3 performing stock markets in 2024 were Argentina (114%), Pakistan (88%) and Kenya (79%), according to Topline Securities. The US markets posted double digit gains with the AI-driven tech-heavy NASDAQ-100 up 27.6%. Small and medium US companies performed well with the Russell 2000 Index edging out India's Sensex with an 8.9% return.  

Pakistan Among Top Performing Stock Markets in 2024. Source: Bloomberg

Clearly, the $7 billion IMF program helped restore some investor confidence in Pakistan's economy in 2024. It was also boosted by remittances from overseas Pakistanis in  July-October 2024 which soared nearly 35% YoY to $11.8 billion as compared to $8.8 billion in July-Oct 2023. The fact that the KSE100 shares valuations relative to earnings still remain at historic lows (PE ratio of just 5.9) is an indication that investors have doubts about the sustainability of the economic improvements in the country. Among the top investor concerns appear to be worsening internal security situation and rising political instability. 

History of Pakistan's KSE-100 Returns Since 1995. Source: Bloomberg

Pakistan's macroeconomic indicators have significantly improved in 2024. Inflation has come down dramatically, from 29.7% in December 2023 to 4.1% in December 2024, resulting in aggressive monetary easing of 900 bps by the State Bank of Pakistan (SBP). The current account deficit has turned into a surplus of $729 million in November 2024 and the currency has remained stable.  In spite of the run-up, the KSE-100 2025 forward PE ratio of 5.9x is still substantially below the 10-year average P/E of 8.2x. 

Pakistan Shares Index PE Ratio. Source: Arif Habib

Pakistan's exports grew to $16.56 billion, an increase of 10.52% in July-Dec period in 2024 over the same period in 2023, while  imports grew 6.11% to $27.73 billion in this period. Pakistan's textile exports grew 9.7% in the first six months of the current fiscal year. The trade deficit in July-December FY25 increased 0.18% to $11.17 billion from $11.15 billion over the prior year. In December, the deficit jumped 34.80% to $2.44 billion from $1.82 billion in December 2023. The trade gap contracted to $24.08 billion in FY24 from $27.47 billion in the preceding year. The current account improvement was helped by remittances from overseas Pakistanis in  July-October 2024 which soared nearly 35% YoY to $11.8 billion as compared to $8.8 billion in July-Oct 2023.

Pakistan Textile Exports. Source: Arif Habib

In 2024, Pakistan began to make some progress to resolve the economic impact of high electricity rates and rising debt (PKR 2.1 trillion) owed to the independent power producers (IPPs). While the government terminated or renegotiated power purchase contracts (PPAs) with some IPPs, the consumers took matters into their own hands and started an unprecedented solar energy revolution. 

As a result of the latest round, PPAs with five IPPs were terminated as a first step. Two of the five IPPs took haircut deals, accepting a discount of up to PKR 20 billion. 18 other IPPs face possible conversion to take-and-pay contracts, whereby the state-owned off-taker will only be liable to pay for energy consumed by the grid, eliminating capacity charges, according to a report by the Institute for Energy Economics and Financial Analysis. 

Pakistan Solar Projects Seen From Satellites. Source: Atlas Via Blo...

High power prices are fueling a massive solar buildout across Pakistan, according to a Yale360 report. Solar imports from China so far this year have already outstripped imports across all of last year, Bloomberg reports. Panels purchased in 2024 amount to 17 gigawatts of capacity, enough to raise Pakistan's total power capacity by a third. A satellite data analysis done in April by Norwegian firm Atlas revealed around 400 solar plants across the country, clustered mostly in industrial hubs. But many more installations went undetected, the geospatial analysis firm said. Most panels have been deployed almost equally across homes, factories, and farms, solar distributors say. 

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[Riaz Haq]

Arif Habib Limited
@ArifHabibLtd
The KSE100 index has posted a solid growth of 84%, adding 52,676 points during CY24

The main sectors driving this growth were Banks, contributing 13,847 points, followed by Fertilizers with 11,169 points and E&P chipping in 10,012 points. These sectors have contributed 35,028 points to the index making 66% total contribution.

In terms of individual companies, FFC contributed the most with 6,086 points, MARI has added 3,977 points, UBL has added 3,957 points, and OGDC accounted for 2,613 points.

https://x.com/ArifHabibLtd/status/1875417038639837225

[Riaz Haq]

The programme, titled "Pakistan Country Partnership Framework 2025-35", aims to improve social indicators in the most neglected but important areas

https://www.thehindu.com/news/international/world-bank-to-approve-2...

The World Bank is set to approve a $20 billion indicative lending package for Pakistan – a pioneering 10-year initiative to protect its funded projects from political transitions and focus on six targeted areas, according to a media report.

The programme, titled "Pakistan Country Partnership Framework 2025-35", aims to improve social indicators in the most neglected but important areas, The Express Tribune newspaper reported, citing official documents.

It will focus on reducing child stunting, combating learning poverty, enhancing climate resilience, decarbonising the environment, expanding fiscal space, and boosting private investment to improve productivity.
These areas have broad support across the political spectrum and are expected to remain unaffected by government changes during the 2025-2035 period, which is anticipated to include at least three general elections.

This 'Country Partnership Framework' is scheduled to be approved by the World Bank board on January 14, following which the global lender's Vice President for South Asia Martin Raiser is also expected to visit Islamabad.

According to the World Bank's assessment, the planning framework "will help shield the programme from the country's volatile polity and frequent swings in priorities and requests that follow government changes." The requests arising from government changes have caused 'fragmentation of the World Bank portfolio and diluted impacts,' it said.

A key Pakistani official, who was part of the framework development, said that the World Bank picked Pakistan as the first country where it would introduce the 10-year partnership strategy.

"The World Bank's total indicative lending envelope for fiscal year 2025 to 2035 will total around USD 20 billion," reads a draft of the framework.

Out of the $20 billion, the World Bank's concessional arm, the International Development Association (IDA), will lend $14 billion and the remaining USD 6 billion is projected to be provided through the relatively expensive window - the International Bank for Reconstruction and Development (IBRD).

"However, these indicative loans will depend upon the evolution of the IDA funding over the years, Pakistan's standing and performance, including with respect to the Sustainable Development Finance Policy and its debt vulnerability indicators," reads the document.

In addition to the USD 20 billion loans to the government of Pakistan, the new framework also aims to support another USD 20 billion private lending by the World Bank's two other arms - the International Finance Corporation (IFC) and the Multilateral Investment Guarantee Agency (MIGA). This brings the total package to USD 40 billion but the official loans will be equal to USD 20 billion, according to the newspaper.

The new lending will focus on six areas that "currently enjoy strong support across the Pakistani political spectrum", according to the documents. However, it will phase out lending from 10 less-impactful sectors, such as transport, power transmission, telecoms, tertiary healthcare and higher education.

The World Bank's concessional and expensive lending will be meant for "larger projects on average, more frequent scale-ups and expansions, and less pilots and one-off operations", according to the planning document.

The Washington-based Bank's new strategy marks a shift from "short-term macro-fiscal adjustment programmes and often small investments scattered in a wide array of sectors, to more selective, stable and larger investments in areas that are critical for sustained development and growth".

[Riaz Haq]

Economy improving, inflation to drop further: SBP chief
The governor attributed the positive trends to an increase in exports and remittances.


https://tribune.com.pk/story/2521065/pakistans-economy-improving-in...

State Bank of Pakistan (SBP) Governor Jameel Ahmed stated on Thursday that the country is on track to meet its economic targets, with its debt levels and balance of payments remaining under control.

Speaking at the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), Ahmad said that inflation is expected to decline further in January, while interest rates will also decrease due to improvements in debt repayment

The governor attributed the positive trends to an increase in exports and remittances, which have contributed to a better current account balance. He emphasized the need to further boost exports, as this will lead to improvements in the current account and balance of payments.

Ahmad also highlighted the country's debt repayment progress, noting that the total debt has remained stable at around $100 billion. He added that the country has made a payment of $2 billion towards its Eurobond obligations and has successfully converted short-term debts into long-term ones.

Meanwhile, FPCCI President, Atif Ikram Sheikh, urged the State Bank to reduce interest rates to single digits to support economic growth. He noted that inflation has decreased to 4.1% in December 2024 and that the justification for double-digit interest rates no longer exists.

Other speakers at the event emphasised the importance of export-led growth, stating that it is the only viable and sustainable path for the country's economy.

They also called for easier and cheaper access to finance for trade, industry, and small and medium-sized enterprises

[Riaz Haq]

Pakistan’s remittance inflow at $3.1bn in December 2024, up 6% month-on-month - Pakistan - Business Recorder

https://www.brecorder.com/news/40342066

Remittances increased 33% year over year to $17.8 billion in 1HFY25, compared to $13.4 billion in 1HFY24. Home remittances play a significant role in supporting the country's external account, stimulating Pakistan's economic activity as well as supplementing the disposable incomes of remittance-dependent households.

[Riaz Haq]

Beijing and Islamabad have pledged to deepen their bilateral ties, renewing a commitment for the second phase of the strategic China-Pakistan Economic Corridor.

https://www.dw.com/en/china-pakistan-agree-to-upgrade-cpec-cooperat...

China and Pakistan have reaffirmed their vow toward the development of the second phase of China-Pakistan Economic Corridor (CPEC), the two nations said on Saturday.

The remarks came after Chinese Vice Foreign Minister Sun Weidong and Pakistan's Foreign Secretary Amna Baloch met in Beijing on Friday for the fourth cycle of diplomatic talks at the vice-foreign ministerial level.

"The two sides agreed that China and Pakistan are ironclad friends and all-weather strategic cooperative partners, and the time-tested friendship between the two countries has grown even stronger," China's Ministry of Foreign Affairs said in a statement on Saturday.

CPEC 2.0
Both foreign officials also co-chaired the fifth meeting of the CPEC Joint Working Group on International Cooperation and Coordination (JWG-ICC) on Friday.

Beijing said that the two countries agreed on the need to "upgrade" the CPEC.

The agreement — which was signed in 2015 — pledges billions of dollars of Chinese investment in Pakistan's infrastructure.

The project is part of China's mammoth Belt and Road Initiative (BRI) which is aimed at developing trade routes to connect with the rest of the world.

Islamabad said on Friday that a "high quality development" of CPEC 2.0 would focus on industrialization, Special Economic Zones (SEZ's), clean energy, agriculture and livelihood projects.

A statement from the Pakistani Ministry of Foreign Affairs posted on social media said "both sides reiterated firm resolve to elevate Pakistan-China ironclad ties to a new pedestal of cooperation and collaboration."

Pakistan's economic hurdles
Chinese investment in the region is facing the challenges posed by political instability, economic stagnation and energy supply issues.

Earlier this week, hundreds of Pakistani protesters blocked a section of a key highway that forms part of the CPEC in protest against power outages.

Locals in the snowy Gilgit-Baltistan region suffered blackouts of more than 20 hours amid temperatures of -15 degrees Celsius (5 degrees Fahrenheit).

The demonstrations on the Karakoram Highway in Hunza Valley prevented dozens of freight trucks from crossing into China.

Pakistan is hoping the greater Chinese investment to help alleviate its economic woes.

[Riaz Haq]

Arif Habib Limited
@ArifHabibLtd
Current Account Surplus reached USD 1.2bn during 1HFY25

Current Account surplus of USD 582mn for the month of Dec’24 compared to a surplus of USD 684mn during Nov’24.

During 1HFY25, the country’s posted current account surplus of 1,210mn as compared to a deficit of USD 1,397mn during the same period last year.

https://x.com/ArifHabibLtd/status/1880122323883155621

[Riaz Haq]

Arif Habib Limited
@ArifHabibLtd
Pakistan Technology - Highest-ever IT exports recorded in Dec’24 (USD 348mn).

https://x.com/ArifHabibLtd/status/1880207335236481372

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https://tribune.com.pk/story/2522840/it-exports-hit-record-348m-in-...

Pakistan achieved record monthly IT exports of $348 million in December 2024, marking a 15% year-on-year (YoY) increase and a 12% rise month-on-month. These exports also surpassed the 12-month average of $299 million. December 2024 marked the 15th consecutive month of YoY IT export growth, starting from October 2023. Cumulatively, the first half of FY2024-25 (1HFY25) IT exports reached $1.86 billion, up by 28% YoY.

According to Nasheed Malik, an official of Topline Research, the YoY jump in IT exports can be attributed to several factors, including the global expansion of Pakistani IT companies' client base, particularly in the GCC region. Other key contributors include the relaxation of the permissible retention limit by the State Bank of Pakistan (SBP) - increasing it from 35% to 50% in Exporters' Specialised Foreign Currency Accounts - as well as the introduction of equity investment abroad through these foreign currency accounts and the stabilisation of the local currency, which encouraged exporters to repatriate a larger share of their profits.