Strong Market Performance in 2024: KSE 100 Index Soars 84%
Staff Report:
The benchmark KSE 100 Index delivered an impressive gain of 84% (87% in US$) in 2024, marking the highest percentage return in 22 years. The previous high was a 112% return in 2002.
This return includes dividends received during the period.
Improving macroeconomic indicators under the new IMF program, such as falling inflation, declining yields on fixed income, a 900 bps monetary easing by the central bank, improved external accounts, stable currency, and political stability, contributed to the market’s strong performance in 2024.
PSX’s market capitalization also rose by 63%, reaching US$52bn, though it remains below its 2017 peak of US$100bn. This decline is due to rupee devaluation, large dividend payouts, and fewer new listings. The Market Cap to GDP ratio of Pakistan now stands at 12%, up from 9% in 2023, but still below the 10-year average of 16%.PSX Rallies as Investor Confidence Peaks
The significant rise in the index has been accompanied by a notable increase in trading activity. Daily volumes (ready/cash) at PSX rose by 76% to 569 million shares/day in 2024, an all-time high. Similarly, the average traded value per day surged 122% to Rs22bn/day in the cash market, the highest since 2007.
In the futures market, total traded volume and value per day rose by 68% and 80%, reaching 184 million shares/day and Rs8bn/day, respectively.
According to Bloomberg data, Pakistan’s KSE-100 Index was one of the second-best-performing markets in both US dollars and local currency after Argentina in 2024.
The KSE Index also outperformed other asset classes in Pakistan in 2024, including Pakistan Investment Bonds (PIBs) (+27%), Gold (+24%), 1-year PKR Naya Pakistan Certificate (+22%), T-Bills (+21%), US Dollar (+1 to 4%), and Property (-11 to +14%).
PSX also saw an increase in offerings in 2024, with 7 IPOs (including 2 GEM Board offerings), compared to just 1 IPO in the previous year. The total amount raised through these 7 offerings in 2024 stood at Rs8.4bn, marking the highest level since 2021.
A major development at PSX in 2024 was the listing of government shariah-compliant bonds/sukuks. Through 15 auctions, the government raised Rs2tn. However, secondary market trading remains thin, with volumes below Rs163mn a day as of December 16, 2024.
Local Mutual Funds and Insurance Companies as Major Buyers in 2024
Local Mutual Funds and Insurance companies emerged as the primary buyers in 2024, benefiting from falling interest rates, while foreign investors were net sellers due to passive fund outflows.
Mutual funds experienced record net buying of US$183mn (Rs51bn) in 2024, the highest since 2017, when it stood at US$217mn (Rs23bn). This buying trend is largely attributed to a shift from fixed-income instruments to equity funds amid lower interest rates.
The insurance sector was the second-largest net buyer in 2024, following three consecutive years of net selling, recording net purchases of US$60mn (Rs17bn) during the year.
The buying by local mutual funds and insurance companies absorbed the selling of US$210-220mn by three international passive funds exiting Pakistan in 2024: iShares Frontier, Select EM ETF, and Vanguard.
Despite the selling by foreign funds, overall FIPI (corporate net of debt) stood at -US$89mn, indicating that active foreign corporates purchased shares worth US$120-130mn in 2024.
