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‘Pre-election rally’: PSX has potential to reach near 50,000, says brokerage house

  • Topline Securities says assuming smooth election process and approval of the IMF tranche in November, the KSE-100 could see 8-10% rally
Published September 25, 2023

The Pakistan stock market can potentially come close to the 50,000 level near the general elections, assuming there is a “smooth election process” and the International Monetary Fund (IMF) approves the next tranche of the Stand-By Arrangement in November.

This was stated by brokerage house Topline Securities in a report released on Monday.

“We believe that the Pakistan market can potentially experience an 8-10% pre-election rally thereby, has the potential to reach near 50k assuming a smooth election process and the approval of the IMF tranche in November,” said Topline Securities.

The country’s equities market has remained range-bound in recent weeks and is currently near the 46,400 level over uncertainty around Pakistan’s economic future that has been dampened by lack of inflows from multilateral and bilateral partners. Additionally, a worsening inflation outlook and talks of a hike in interest rate had previously kept investors on the sidelines as well.

However, it got a significant push last week, after the Election Commission of Pakistan (ECP) announced that the general election would be held in the last week of January 2024.

It is pertinent to mention that the assemblies were dissolved in August 2023, and as per the Constitution, the general elections should be held in less than 90 days after the dissolution of the National Assembly.

“However, due to the new census of 2023 and the delimitation process, which was approved on August 05, 2023, by the Council of Common Interests, this delay was expected. That’s why there was uncertainty about the General Election and its timeline,” said Topline in its report.

“We think the upcoming election, the direction of the Pak Rupee and the IMF-November review are key market drivers in the short run,” it said.

The brokerage house was of the view that on the assumption of a stable PKR amid recent steps taken by the State Bank of Pakistan (SBP) and law enforcement agencies, “we may see local equities performing well ahead of elections”.

Topline mentioned that in the past, the benchmark KSE Index has posted an average gain of 8% four months before the elections.

“PSX saw a 4-month pre-election positive rally in 3 elections (1997, 2002, & 2013) out of 5, with an average return of 17%. Interestingly, in the 2008 and 2018 elections, no positive pre-election rally was seen due to economic issues.

“In total, over the last 5 elections, PSX witnessed an average 4-month pre-election return of 8%.

“Similarly, PSX witnessed a 3-month pre-election rally in 4 out of 5 elections (1997, 2002, 2008, & 2013) with an average return of 7%. In the 2-month pre-election period, PSX observed pre-election rallies in 3 out of 5 elections (1997, 2002, & 2013) with an average return of 7%.”

Meanwhile, in the last month of elections, PSX experienced an average positive return of 7% in all 5 elections, highlighted the report.

Topline shared that Pakistan’s equity market is currently trading at cheap price-to-earnings (PE) multiple of 3.9x and a positive development like timely and peaceful election and subsequent passing of power to the elected democratic government will improve investors confidence.

The KSE-100 Index, largely seen as a benchmark for market performance, was last seen over the elusive 50,000-point mark back in June 2017. Since then, it has been unable to come too close to this level.

The IMF programme approval triggered a fresh wave of buying, taking the KSE-100 near 49,000 in August 2023, but since then, it has retreated due to profit-taking and lack of fresh triggers.


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