Pakistan’s benchmark KSE-100 Index witnessed double-digit growth of 12% in 3Q2023, as sentiments improved on back of the International Monetary Fund (IMF) Stand-By Agreement (SBA) secured in July, stable currency, and announcement of elections, said Topline Securities in a report released earlier this week.
The index was up 11% in USD terms in 3Q2023.
The brokerage house, citing data from Bloomberg, shared the Pakistan equities market emerged as the sixth best-performing bourse after Turkey (+37%), Romania (+27%), Sri Lanka (+15%), Egypt (+14%), and Ghana (+12%) in 3Q2023.
Sharing key indicators, Topline said the average traded volumes in the cash and ready market increased by 29% YoY and 85% QoQ to 283 million shares per day, while the average traded value also jumped by 39% YoY and 114% QoQ to Rs9.7 billion per day during 3Q2023.
“Foreign interest also revived with foreign corporates turning net buyers with $25 million in 3Q2023 vs net selling of $10 million in 2Q2023,” it said.
“On the local side, insurance and companies were major buyers with net buying of $45 million and $25 million, respectively. However, local mutual funds and banks remained major sellers of $40 million and $37 million, respectively.”
As per the report, Standard Chartered Bank (SCBPL) (up 75%), Unity Foods (UNITY) up (61%), and Habib Metropolitan Bank (HMB) (up 55%) emerged as the best-performing stocks during the quarter.
What factors can impact the direction of PSX?
As per the report, going forward, the performance of the government in meeting targets assigned by the IMF under its SBA i.e. primary budget deficit, government guarantees and targeted cash transfers will be crucial to secure another tranche expected in November.
On the currency, the brokerage house noted that due to measures announced by the government and State Bank of Pakistan (SBP), including tightened security along the border and closure of exchange companies involved in illegal activities, has led the rupee to appreciate by 7%, rising from Rs307 to Rs288 against the USD in the inter-bank market.
Meanwhile, in the open market, the rupee has appreciated by 13% from Rs328 on Sep 04, 2023 to Rs289 as of Sep 28, 2023.
“We believe the movement of rupee will impact direction of the stock market,” it said.
The report further noted that the smooth handling of the election process, which is expected to be held in the last week of January, “will definitely help restore investors’ confidence.”
“Based on past trends, the Pakistan market has rallied most of the time before elections,” it said.
The brokerage house noted expects a jump in inflation in the month of September amid the recent hike in local fuel prices, “but will start declining from October onwards with major decline expected from 1Q2024.
“The trajectory of inflation will be closely watched as it can significantly impact the market direction,” it said.
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