PSX Crosses 57,000 For The First Time in History After IMF Staff-Level Agreement

The Pakistan Stock Exchange (PSX) rallied to a new all-time high on Thursday following the staff-level agreement by the International Monetary Fund (IMF) for a loan tranche of ~$700 million. After opening trade at 56,680 points, the benchmark KSE-100 index went up by 1.52 percent or 864 points at 1:40 PM to a new high of 57,544. It settled with a gain of 717 points closing at 57,397. The KMI 30 index gathered 1,593 points settling at 98,921, while the KSE All share index surged by 713 points to close at 38,382. The successful completion of the lender’s first review of Pakistan’s Standby Arrangement helped the stock market break all records. The IMF team has reached a staff-level agreement (SLA) with the Pakistani authorities on the first review of their stabilization program supported by the IMF’s US$3 billion (SDR2,250 million) SBA. The agreement is subject to the approval of the IMF’s Executive Board. Upon approval around US$700 million (SDR 528 million) will become available bringing total disbursements under the program to almost US$1.9 billion,” IMF said quoting Nathan Porter, who led the IMF team that visited Islamabad from November 2-15, to hold discussions on the first review. The highest participation was witnessed in Worldcall Telecom Limited (PSX: WTL) with over 386 million shares traded, followed by Cnergyico PK Limited (PSX: CNERGY) and Pakistan Refinery Limited (PSX: PRL). The scrips had 45.1 million shares and 39.5 million shares traded, respectively. According to Arif Habib Limited, the KSE-100 index posted an astonishing return of 36.7 percent (+15,227 points) to 56,680 since the IMF Stand-by Arrangement amounting to USD 3.0 billion signed back in Jun’23. During the last month (since 18th Oct 2023), the KSE-100 index jumped from 49,431 to 56,680 level posting a return of 14.7 percent. Top ten stocks including HUBC, BAHL, LUCK, EFERT, OGDC, MEBL, ENGRO, PSO, COLG, and MTL contributed 50.0 percent of this rally. HUBC led the rally with 15 percent or 1,081 points contribution since 18-Oct-23 followed by BAHL, LUCK, EFERT, and OGDC with contributions of 6.1 percent, 4.8 percent, 4.0 percent, and 3.9 percent respectively. In the top 25 major index contributors, the companies that underperformed in the KSE-100 index include ENGRO, UBL, MCB, PPL, FFC, SYS, ILP, POL, MARI, and HBL. However, RMPL, JVDC, EFUG, JDWS, and POML remained the negative. The top five sectors contributed 10,801 points (70.9 percent of the total) since 27-Jun-23 to the index. Banks remained the major contributor to the index, contributing 4,555 points (30 percent of the total) since 27-Jun-23. Power & E&P contributed, 2,094 points and 1,651 points, respectively, while Cement & Fertilizer contributed, 1,331 points and 1,172 points. Despite recent trends, AHL maintained the view that the market is currently trading significantly below its historical averages. Even with a 36 percent surge since July 2023, the KSE-100 index is trading at a PE of 4.3x, a discount of 25 percent compared to the five-year average PE(x) of 5.7x. Furthermore, the KSE-100 index trading at PB of 0.6x and offering an alluring DY of 10.5 percent, both reflecting a discount of 43 percent and 26 percent, respectively, compared to the 5Y averages. The profitability of the KSE-100 saw a 2.1-fold increase, reaching Rs.  1,369 billion in 2023, compared to Rs. 629 billion in 2017. The leverage position is also 25 percent lower when compared with the all-time high levels of 2017. The current market leverage including MTS, MFS, and future counter is Rs.  28.2 billion while back in 2017 the total leverage position was Rs. 37.6 billion. Looking at the market cap to GDP ratio, the market is currently trading at 9.6 percent while in 2017 this ratio was 29.4 percent. The next rally would likely be triggered in the energy chain including heavyweights E&Ps and OGMCs. The energy stocks including OGDC, PPL, MARI, PSO, and SNGP are still trading at attractive FY24 PE of 2.7x, 2.4x, 3.1x, 2.4x, and 2.0x respectively as compared to the KSE-100 index PE of 4.3x.