Fuelled by new-found optimism amid improved economic indicators, the Pakistan Stock Exchange’s (PSX) benchmark KSE-100 index is expected to reach 81,000 level by December 2024, according to a ‘strategy’ paper by a brokerage house.
Arif Habib Limited (AHL) in its ‘Pakistan Investment Strategy Report 2023’ unveiled on Monday said the KSE-100 is expected to close at 81,259 points by December 2024, offering an upside of 32% from the index closing of 01-Dec-2023.
“We anticipate robust growth across all the sectors, projecting double-digit earnings growth for the majority. Our outlook for KSE100 indicates an expected 17.2% earnings growth in 2024,” said AHL.
At present, the PSX is enjoying a buying spree which comes on the back of heightened buying from both local and international investors.
On Monday, the benchmark KSE-100 Index crossed the 62,000 level for the first time in history to settle at 62,493.
In its report, AHL maintained an optimistic economic outlook for FY24, expecting a strong rebound in FY24 GDP growth to ~3.33%, as compared to a contraction of 0.17% in FY23. This would further accelerate to 4.58% in FY25, it said.
“Secondly, we expect inflationary pressure to ease substantially over the next 6-12 months resulting in CPI inflation decelerating to 24% in FY24.
“Lastly, we anticipate an accommodative monetary policy stance, starting the first quarter of CY24, which shall catalyse accelerated economic activity in the latter part of the current fiscal year and more importantly in the 2H2024,” the report said.
The AHL’s strategy report noted that the PSX has witnessed a resurgence of foreign buying, and the market is expected to keep the investors interested on the back of an IMF program and extremely attractive valuations.
“We project a foreign capital inflow of $200-300 million in 2024, with potential for the actual amount to exceed this range,” highlighted the AHL report.
On the political front, AHL’s report was of the view that in the upcoming election, scheduled to be held in February 2024, there is a palpable sense of optimism and anticipation surrounding the prospect of a coalition government emerging as a catalyst for political stability.
“Having said all the above, we do not rule out any street agitation and protests post elections as is usually witnessed in the country as results are widely rejected. That may shake sentiment in the short term.
“Over the medium to long term horizon, we view that the PSX is set to usher in a fresh era of long-awaited re-rating and value realization,” AHL said.
On the external side, the report highlighted that with repayment obligations of $87.4 billion during FY24-26, the external account remains in a tight spot. Whereas, the government seeks to use a combination of bilateral and private debt, and multilateral flows to meet its funding needs.
“Unlocking these flows, however, would require Pakistan to stay engaged with the International Monetary Fund (IMF) with another bigger program necessary post-general elections later next year,” AHL said, adding that the continuation of Pakistan’s engagement with the IMF is imperative for the country to navigate its economic challenges.
On the exchange rate, AHL said the currency is expected to remain stable in the near term amid anticipation of the IMF’s next tranche following the Executive Board’s likely approval in the first week of December 2023, coupled with forthcoming inflows from bilateral and multilateral creditors.
“Our projections indicate that by the closing rates of June 2024 and December 2024, the PKR/USD rates are expected to stand at 315 and 328, respectively,” it said.