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Pakistan’s stock market delivered an exceptional performance in 2023, as highlighted by the Pakistan Market Overview. The KSE 100 Index, the main index of the Pakistan Stock Exchange, surged by 55% (24% in US dollars), representing the highest increase in 13 years. This remarkable growth included dividends distributed during the same period.

The performance of the KSE-100 Index in 2023 was marked by a dichotomy. The first half saw a modest increase of 4%, while the latter half witnessed an impressive surge of 51%. Several factors contributed to this robust performance, including a favorable IMF Stand By Agreement, the successful completion of the first IMF review, currency stability, and the announcement of national elections. These developments instilled confidence in investors and positively impacted the market.

Market activity experienced a notable upswing, with daily trading volumes at the Pakistan Stock Exchange reaching 323 million shares, the highest since 2021, reflecting a 41% increase. The daily average trading value in the cash market also saw a substantial rise, reaching Rs 10 billion, a peak not seen since 2021, representing a 45% increase. In the futures market, the volume and value of trades per day increased by 17% and 24%, respectively, reaching 110 million shares and Rs 4.5 billion.

According to Bloomberg’s data, the KSE-100 Index was ranked as the third-best performer in terms of local returns for 2023. However, when returns were calculated in US dollars, it did not make the top 10. In the second half of 2023, the PSX emerged as the leading market globally, achieving gains of 51% in Pakistani Rupees and 54% in US dollars.

When compared to other investment vehicles, the KSE Index outperformed in 2023, surpassing the 1-year US Dollar Naya Pakistan Certificate (up by 33%), US Dollar (up by 24%), Treasury Bills (up by 23%), and Gold (up by 21%). Real estate indices reported annual returns ranging between 6% and 29%.

However, it was a subdued year for initial public offerings (IPOs) in Pakistan, with only one IPO raising Rs 435 million. This is the smallest amount collected through an IPO in over a decade, falling short of the previous low of Rs 800 million in 2013. Macroeconomic instability, the risk of default, undervalued market prices, and political uncertainties deterred equity investments throughout the year.

On a positive note, foreign corporations became net purchasers in 2023, buying stocks worth US$73 million. This marked a significant shift after three years of net selling and represented the largest influx of foreign capital in eight years. In the preceding three years (2020-2022), these corporations had sold shares totaling US$1.1 billion. Domestic companies and individual investors also actively participated in the market, acquiring stocks worth US$128 million and US$27 million, respectively.

However, local mutual funds and banks reduced their market holdings, with net sales of US$132 million and US$61 million, respectively, in 2023.

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