KARACHI: The Pakistan Stock Exchange (PSX), which was declared the second-best market in the region last month, may achieve a historical milestone as financial experts expect the benchmark KSE100 index to hit 55,000 points by the end of the year.
“Our target for the current year was 52,000 points,” Shahid Ali Habib, CEO of Arif Habib Limited (AHL), a leading brokerage and financial services firm, told Arab News on Saturday.
“The low interest rate regime is fueling economic growth, making it easy for us to achieve this target and creating some optimism that the KSE100 index may hit 55,000 points by year-end,” he continued.
Muhammad Sohail, CEO of Topline Securities, agreed with the assessment, saying: “Our target in 2021 Pakistan Outlook was 52,500 points, but I won’t be surprised if we surpass that level within the next few months.”
The upward journey of the Pakistani bourse made it the second-best preforming market in the region and seventh in the world in January 2021, according to Bloomberg and other organizations. Last week, the KSE100 index hit 47,341.58 points for the first time in over three years.
“First of all, earning growth is impressive and attractive [at the stock market]. Other than that, there is abundant liquidity pool, and we expect foreign inflows after the US presidential elections,” Habib said while explaining reasons for the positive market outlook.
Experts say higher returns on equity investment are tempting investors to move away from fixed income securities to equity investment, describing it as another variable contributing to the growth of the market.
Previously, the Pakistani stock exchange had achieved its highest level in 2017 when the KSE100 index hit 53,103 points in intraday trading in May.
“Continued economic recovery, as shown by growth in large scale manufacturing, improved domestic liquidity, stronger balance of payments, lower interest rates and increase in corporate earnings should support market levels. The market should touch about 52,000 points by year-end,” Samiullah Tariq, research director at the Pakistan-Kuwait Investment, commented.
Financial experts say that macroeconomic indicators are gradually improving due to the low discount rate regime.
Last year, the central bank drastically cut key policy rate from 13.25 percent to seven percent between March and June to support economic growth and protect jobs amid the COVID-19 pandemic.
“We have seen the first quarter earnings of 47 percent while 30-35 percent growth is expected in the second quarter,” Habib said, adding: “This owes to the improving macroeconomic indicators. This is amazing.”
The bullish bourse is also becoming an attractive place for the corporate sector to raise funds. Since July 2020, about Rs22 billion ($137 million) have been raised by companies through initial public offerings (IPOs). About six to eight more IPOs are also expected this year.
“The market has received an overwhelming response from investors and most of the shares offered are oversubscribed,” Habib said. “This can be gauged by the fact that Panther Tires received a demand of Rs8.2 billion against the total issue size of Rs1.88 billion.”
He warned that any “sudden increase in discount rate” would risk the market growth, though he added that the central bank had assured that the rate would remain unchanged in the foreseeable future.
