psx predicted to reach 81,000 points by December 2024, according to AHL report
Published on: December 6, 2023.
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The Pakistan Stock Exchange (PSX) is set to experience a strong surge over the next 13 months, reaching a remarkable 81,000 points by December 2024, as per a recent report by Arif Habib Limited (AHL), a leading brokerage firm. Titled ‘Pakistan Strategy 2024 – Targeting 81,000; Resilience and Redefined,’ the report attributes this bullish outlook to several factors, including political stability, economic recovery, robust corporate earnings, attractive stock valuations, and abundant domestic liquidity.
The PSX has already demonstrated an impressive performance over the past five months, soaring by 55% and reaching an all-time high of 62,493 points on Monday. Notably, the index has outperformed its regional and global counterparts, delivering a 45% return in the current year so far.
According to the report, the PSX is still significantly undervalued, with a price-to-earnings ratio of 4.2, representing a 29% discount compared to the last five-year average of 5.9. Furthermore, the market capitalization to GDP ratio of the PSX stands at 8.8%, indicating a 26% discount compared to the last five-year average.
One of the driving forces behind this market rally is the announcement of the general elections in Pakistan, scheduled for February 8, 2024. The report suggests that these timely elections and the ensuing formation of a newly elected government will usher in a period of political stability and economic reforms. This, in turn, is expected to boost investor confidence and sentiment.
The report also presents a positive macroeconomic outlook for Pakistan. It anticipates GDP growth rebounding to 3.3% in FY24, inflation easing to 24% by June 2024, the current account deficit narrowing to 1.1% of GDP in FY24, and the stabilization of the Pakistani rupee against the US dollar.
Furthermore, the report predicts that the State Bank of Pakistan (SBP) will adopt an accommodative monetary policy stance, starting from the first quarter of CY24. It is projected that the key policy rate will be reduced by 7 percentage points to 15% by December 2024. This monetary easing is expected to stimulate economic activity and drive demand for credit and investment in the country.
The report identifies several sectors that are likely to benefit from the favorable macroeconomic and market conditions, including banking, cement, fertilizer, oil and gas, power, and steel. However, it also highlights potential risks that could derail the market rally, such as global and local macroeconomic and geopolitical uncertainties, increasing commodity prices, political instability, and aggressive structural reforms.
In conclusion, the Pakistan Stock Exchange is poised for a remarkable rally, with the index projected to reach 81,000 points by December 2024. This positive outlook is underpinned by factors such as political stability, economic recovery, strong corporate earnings, attractive stock valuations, and ample domestic liquidity. While certain risks exist, such as global uncertainties and commodity price hikes, the overall market conditions are favorable. Investors can look forward to opportunities in sectors like banking, cement, fertilizer, oil and gas, power, and steel.
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