KSE-100 Index may rally above 120,000 by Dec 2025: Analysts

November 18, 2024 (MLN): Pakistan’s stocks are expected to rally further by at least 26% by the end of next year on the back of improving macro indicators and falling bond yields which is flushing more liquidity in equities, according to two brokerage houses.

The equity benchmark KSE-100 Index is forecast to increase to 120,000 by December 2025, an increase of 26% from Monday's closing of 94,996, according to Arif Habib Ltd. report.

Topline Securities Ltd. forecast the index to reach 127,000 points, a gain of 34%.

“The stage is set for a potential market re-rating with declining interest rates, a stable rupee, and improving macroeconomic indicators,” AHL commented in a report.

Pakistan is also increasingly attracting the attention of foreign investors, particularly in its debt and equity markets, it said.

Topline in a separate report said the equity market will be offering over 30% return including a 10% dividend yield by the end of 2025.

Pakistan's economy has witnessed a remarkable turnaround following a challenging period marked by peak inflation rates of 38% in May 2023. By October 2024, inflation has significantly eased to 7.2%, reflecting the effectiveness of stringent monetary and fiscal policies alongside stabilizing energy and food prices.

The initial success in controlling inflation was largely influenced by base effects, as energy prices that had previously surged due to geopolitical tensions could not sustain their trajectory, resulting in a YoY moderation.

Additionally, the sharp increases in food prices, initially exacerbated by shortages, have begun to stabilize.

The combined impact of these factors, bolstered by tight monetary and fiscal policies, has led to a sustained decrease in inflationary pressures.

The central bank's foreign exchange reserves have surged past the $11.2 billion mark, marking a significant milestone amid ongoing economic challenges.

The SBP’s proactive measures during the consolidation phase played a crucial role in managing dollar outflows.

By tightening import restrictions and overseeing the repatriation of profits from foreign investments, the central bank effectively stabilized the currency.

External debt repayments are projected to total $26.1bn in FY25, with expectations of rolling over $16.4bn, leaving a manageable net repayment of $5.7bn.

Following the IMF disbursement, the country is well-positioned to attract inflows from multilateral and bilateral lenders. Initiatives to boost Foreign Direct Investment, enhance export performance, and eventually re-enter international capital markets are expected to bolster the external account further.

With these strategic initiatives, the SBP is projected to close FY25 with reserves estimated at $13bn.

To note, KSE-100 Index has advanced over 50% so far this year.

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