Pakistan stocks post 3.3% gain in September

Pakistan’s benchmark equity index, KSE-100, showed strong momentum in September 2024.

The market ended September at 81,114 points, marking a significant gain of 2,626 points or 3.3% compared with the previous month.

Average daily volumes in September settled at 527 million shares, down 2.1% compared with, while the average daily traded value decreased by 13.7% to 57.8 million.

Foreign investors sold shares worth $49.9 million, mainly in fertilizer ($21.3 million), exploration & production ($13.6 million), banks ($8.6 million), cements ($4.6 million), and other sectors ($2.6 million). However, there was net buying of $3.8 million in the technology sector.

Early in the month, the announcement of a 34-month low inflation rate of 9.6% raised investor expectations for a rate cut in the Monetary Policy Committee (MPC) meeting on September 12.

Consequently, the State Bank of Pakistan (SBP) continued its monetary easing, reducing the policy rate by 200 basis points to 17.5%, a move not seen since April 2020.

Additionally, the 50-basis points rate cut by the Federal Reserve boosted market participation across Asian markets, including the local bourse.

On September 25, the IMF's Executive Board approved a $7 billion Extended Fund Facility (EFF), with the first tranche of $1 billion disbursed later that week.

This led the KSE-100 index to reach an all-time high of 82,248 points at closing. However, profit-taking subsequently brought the market below the 82,000 level.

SBP reserves rose to $9.5 billion, the highest since July 2022, increasing by $96 million on monthly basis.

Moreover, Pakistani rupee appreciated against the USD by PKR 0.82 (0.30%) to 277.71.

In the next quarter, several key factors will influence Pakistan’s economic outlook. SBP recently reduced the policy rate by 200 basis points to 17.5% driven by receding inflation.

With inflation expected to remain in single digits, another rate cut is possible. Additionally, the IMF’s approval of Pakistan’s $7 billion Extended Fund Facility (EFF) on September 25, 2024, may lead to an upgrade in Pakistan’s credit rating by agencies like Moody’s, Fitch, and S&P.

The MSCI Semi-Annual Index Review on November 7, 2024, could see an increase in Pakistan’s market weight due to a continued bull run.

Lastly, the economic outlook will also depend on commodity prices, with Brent oil prices having declined from an average of $85 per barrel in 2Q2024 to $79 per barrel in 3Q2024. The petroleum group, which constitutes a significant portion of Pakistan’s imports, accounted for 30% of total imports in the first two months of FY25.