The KSE-100 Index of the Pakistan Stock Exchange (PSX) registered a notable gain of 55 percent in 2023, marking its highest increase in 13 years, according to a report by Topline Securities.
This surge, inclusive of dividends, represents a significant turnaround from the previous year, with a 60 percent increase observed in 2009. In US Dollar terms, the index’s gain was reported at 24 percent during 2023.
The report underscores the KSE-100 Index’s story of two halves, depicting a 4 percent rise in the first half of 2023 and a substantial 51 percent increase in the second half. The latter was attributed to positive factors such as a more favorable than expected IMF Stand-By Agreement (SBA), the successful completion of the first IMF review, currency stability, and the announcement of upcoming elections, all contributing to an improved investor sentiment.
This swift recovery in prices coincided with a remarkable uptick in trading activity. Daily volumes at the PSX increased by 41 percent to 323 million shares per day in 2023, marking the highest since 2021. Similarly, the average traded value per day in the cash market rose by 45 percent to Rs. 10 billion, also reaching the highest level since 2021.
In the futures market, both total traded volume and value per day witnessed increases of 17 percent and 24 percent, reaching 110 million shares per day and Rs. 4.5 billion per day, respectively.
PSX Best-Performing in 2H2023
Bloomberg data revealed that the KSE-100 Index was among the top three best-performing markets in terms of local returns in 2023, particularly excelling in the second half of the year with a 51 percent gain in PKR and 54 percent in US Dollar terms.
In comparison to other asset classes in 2023, the KSE Index outperformed several, including the 1-year US$ Naya Pakistan Certificate (+33 percent), US Dollar (+24 percent), T-Bills (+23 percent), and Gold (+21 percent). Property indices posted returns ranging from 6 to 29 percent during the same period.
Despite the positive market performance, the PSX saw minimal IPO activity in 2023, with only one IPO raising a modest Rs. 435 million. This represents the lowest amount raised in a year in the past decade and is half of the previous record low seen in 2013. The report attributes this subdued IPO activity to macroeconomic instability, the looming threat of default, low valuations, and political uncertainty, all of which discouraged equity investment in 2023.
Interestingly, foreign corporates turned net buyers in 2023 with a net buying of $73 million, marking the highest inflows in eight years. Over the previous three years (2020-2022), foreign corporations had sold shares worth $1.1 billion.
On the domestic front, companies and individuals were net buyers in 2023, with companies purchasing shares worth $128 million and individuals acquiring shares worth $27 million. However, local mutual funds and banks reduced their positions, with net selling of $132 million and $61 million, respectively.
