PSX Ends 2024 as Second-Best Performing Market in the World

The benchmark KSE-100 Index of the Pakistan Stock Exchange (PSX) provided a monstrous gain of 84 percent in 2024, the highest percentage return in the last 22 years, behind the 112 percent return in 2002.  While the return in US dollar (USD) terms was 87 percent, according to a report by brokerage house Topline Securities. The return is inclusive of dividends received during this period.  As per Bloomberg data, KSE-100 Index was the second best-performing market in the world in US dollar terms and local currency after Argentina in 2024, Topline noted.  The report said that improving macroeconomic indicators under the new International Monetary Fund (IMF) program, i.e. falling inflation, falling yields on fixed income, aggressive monetary easing of 900 bps by State Bank of Pakistan (SBP), improved external accounts, stable currency, and political stability, drove the performance of market in 2024.  PSX’s market capitalization also increased by 63 percent to $52 billion but still below its 2017 peak of $100 billion. The decline is due to rupee devaluation, large dividend payouts and fewer new listings. Similarly, Market cap to GDP of Pakistan now stands at 12 percent compared to 9 percent in 2023, however, still lower than last 10-year average of 16 percent.  The reported noted that this significant rise in index has been accompanied with significant improvement in trading activity with volumes (ready/cash) per day at PSX up 76 percent to 569 million shares per day in 2024 which is all time high. Similarly, average traded value per day was up 122 percent to Rs. 22 billion per day in cash market which was also highest since 2007.  In futures market, total traded volume and value per day were also up by 68 percent and 80 percent to 184 million share per day and Rs. 8 billion per day, respectively.  KSE-100 Index also outperformed other asset classes available in Pakistan in 2024 including Pakistan Investment Bonds (PIBs) (+27 percent), Gold (+24 percent), 1-year PKR Naya Pakistan Certificate (+22 percent), T-Bills (+21 percent), US Dollar (+1 to 4 percent), and Property (-11 to +14 percent) in 2024.  PSX also saw an increase in offerings in 2024, with the bourse witnessing 7 IPOs (including 2 GEM Board offerings), compared to just 1 IPO in the previous year. The total amount raised from investors through the 7 offerings in 2024 stood at Rs. 8.4 billion, marking the highest level since 2021.  One major development that took place at PSX in 2024 was listing of government shariah compliant bonds/sukuks. In 2024 through 15 auctions government raised Rs. 2 trillion. However secondary market trading remains thin with volume of less than Rs. 163 million a day till December 16, 2024.  Local Mutual Funds and Insurance companies emerged as major buyers, capitalizing on falling interest rates, while foreign investors were net sellers due to passive fund outflows.  Mutual funds witnessed record net buying of $183mn (Rs. 51 billion) in 2024, the highest since 2017, when it stood at $217mn (Rs. 23 billion). This buying is mainly attributed to a shift from fixed-income instruments to equity funds amid lower interest rates.  Insurance sector remained the second-largest net buyer in 2024, following three consecutive years of net selling. It recorded net purchases of $60 million (Rs. 17 billion) during the year.  Both local mutual funds and insurance buying absorbed selling of 3 international passive funds in Pakistan to the extent of US$210-220mn. The international funds which exited or near to exit Pakistan in 2024 are, iShares Frontier, Select EM ETF and Vanguard.  Despite selling of $210-220 million by these foreign funds, overall FIPI (corporate net of debt) clocked in at -$89 million.