KSE-100 Index likely to reach 109,250 by June 2025: Report

July 04, 2024 (MLN): Pakistan stock market’s benchmark KSE-100 Index is expected to provide a return of 36% to reach 109,250 by June 2025, brokerage house Arif Habib Limited (AHL) said in its latest Pakistan Strategy report.

The index is buoyed by the potential negotiation of the International Monetary Fund's EFF program, a downward trend in the policy rate, and a shift in investments from fixed income to equities; all expected to lead to re-rating of the index, it noted.

GDP expected to grow by 3.2% in FY25 on the back of improved agriculture yields, recoveries in industrial output, and services sector growth, it said.

Pakistan is anticipated to enter a new three/four years Extended Fund Facility program with the IMF, likely amounting to $6-8 billion, AHL noted.

It added that inflation is expected to average around 10.7% in FY25.

Meanwhile, Pakistan's CAD for FY25 is expected to reach $2.6bn as import-led demand rebounds, it added.

The Pakistani Rupee is expected to average around 289 per USD in FY25, according to the report.

Furthermore, AHL expects earnings to grow at 4.9% while ex banks and E&Ps earnings are expected to post 16% earnings growth.

Additionally, the KSE-100 is trading at a 2025 price-to-earnings (PE) multiple of 4.2x, a valuation lower than the 5-year historic average of 5.9x.

The local bourse is expected to garner further attention in FY25 as KSE-100 Index remained the world’s best-performing market with a solid return of 94% in FY24, it noted.

Also, KSE-100 is the second most liquid market in the MSCI Frontier Markets (FM) space, with an average daily trading value (ADTV) of $55 million in FY24.

Furthermore, the index ranks as one of the cheapest market in terms of price-to-earnings (P/E) ratio of 4.2x compared to regional market average of 12.1x, while also being attractive in terms of price-to-book (P/B) ratio of 0.8x vis-à-vis regional P/B average of 1.6x.

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