KSE-100 Index Surges, November Best Month of Year so Far

Despite facing significant economic challenges, Pakistan's Karachi Stock Exchange (KSE) has exhibited a startling resilience. The KSE-100 index, a benchmark for the stock market, has broken through the 100,000-point threshold for the first time, gaining 0.82%, or 813 points on the day.

This surge in the KSE-100 is particularly noteworthy given Pakistan’s current financial situation, characterised by dwindling foreign exchange reserves, mounting debts, rampant inflation, and sluggish economic growth. The International Monetary Fund (IMF) has expressly outlined these difficulties. Despite these adversities, the KSE-100 has persisted in its growth trajectory over the past 15 months, making it the second-best performer in 2024, following Argentina, with gains being seen in 9 out of the 11 months so far.

November is in fact on target to be the best performing month of the year, with gains of 12.64% so far having no match. October marked the best month on record with a gain of 9.68%, with only January and July seeing mild declines, with dips of 0.76%, and 0.71% respectively.

Ownership patterns in the KSE have shifted dramatically. As of now, domestic entities hold a dominant share of 75.8% in KSE All Shares, displaying confidence in local markets despite economic challenges. Conversely, foreign investors have retreated, their holdings plummeting to a mere 3.2% from 28.7% in 2017.

The market's rally was positively influenced by the approval of a $7 billion bailout package from the IMF in September. This aid was a nod to the progress Pakistan has made in combating inflation, which reassured investors and propelled the KSE-100 up by 22.7% in the subsequent two months. Coupled with this, a substantial reduction in retail inflation and a cut in benchmark lending rates by 250 basis points to 15% by the State Bank of Pakistan have painted a more optimistic picture for the future of the market.

With the KSE 100 having started the year out at 62,696, gains of almost 60% on a YTD basis would seem hard to maintain, but if Pakistan's economic conditions stabilise and sustainable growth resumes, the stock market could see further prosperity, particularly since valuation multiples remain at historic lows.