The Pakistan Stock Exchange (PSX) has emerged as one of the top-performing global markets, showcasing an impressive recovery of 12% in the third quarter ending on September 29, 2023.
Topline Research has indicated that several key factors will influence the market’s future direction in the coming quarter. These include the outcome of the International Monetary Fund (IMF) review under the $3 billion loan program, the exchange rate between the rupee and the dollar, and developments related to the upcoming elections scheduled for the last week of January 2024.
After eleven consecutive quarters, the PSX’s benchmark KSE-100 index has experienced double-digit growth, surging by 12% on a quarter-on-quarter basis. In terms of US dollars, the index also saw an 11% increase during the third quarter of 2023, closing at 46,233 points on Thursday.
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The market received a boost in the last quarter due to a better-than-expected IMF Stand-By Agreement (SBA) in July 2023, a stable currency, and the announcement of the upcoming elections.
According to Bloomberg data, Pakistan’s market ranked sixth among the best-performing markets, following Turkey (37% growth), Romania (27% growth), Sri Lanka (15% growth), Egypt (14% growth), and Ghana (12% growth) in the same quarter.
During the quarter, average traded volumes in the cash and ready market increased by 29% year-on-year and 85% quarter-on-quarter to 283 million shares per day. The average traded value also saw a significant rise, increasing by 39% year-on-year and 114% quarter-on-quarter to Rs9.7 billion per day.
In the Futures market, average volumes increased by 15% on a yearly basis and 42% on a quarterly basis to 105 million shares per day. The average traded value in the Futures market also witnessed growth, rising by 28% year-on-year and 75% quarter-on-quarter to Rs4.6 billion per day. Foreign interest in the market has also rebounded, with foreign corporations becoming net buyers in the third quarter of 2023, with net buying of $25 million compared to net selling of $10 million in the previous quarter (2Q2023).
On the local front, insurance companies and corporations emerged as major buyers, with net buying of $45 million and $25 million, respectively. However, local mutual funds and banks were major sellers, with net selling of $40 million and $37 million, respectively.
Key stocks of the KSE-100 index that outperformed the market in the third quarter of 2023 included Standard Chartered Bank (SCBPL) with a 75% increase, Unity Foods (UNITY) with a 61% increase, and Habib Metropolitan Bank (HMB) with a 55% increase.
Key sectors that outperformed the market during the quarter included transport, refinery, and automobile parts.
Looking ahead, the market’s trajectory will depend on the first review of Pakistan’s economy under the IMF short program expected in November 2023. The movement of the rupee, which has strengthened by 7% to Rs288/$ in the past three weeks, will also impact the market. Additionally, the handling of the upcoming general elections and inflation trends will be closely watched.
Analysts expect inflation to rise in September 2023 due to recent hikes in local fuel prices but anticipate a decline starting in October, with a significant drop expected in the first quarter of 2024. The trend in international petroleum product prices will also influence the market, with higher prices potentially having a negative impact on PSX.
