Pakistan’s surging stock market rally has received a significant boost with the return of foreign investors, contributing to a 50 per cent surge in the benchmark KSE-100 Index since late June. In this period, the nation’s stock market has become the world’s second-best performer after Argentina. Encouraged by signs of stability, foreign traders injected $26.3 million into Pakistani stocks in November, marking the highest monthly total in over four years, according to exchange data compiled by Bloomberg.
The rally is underpinned by positive developments, including Pakistan securing a loan agreement with the International Monetary Fund in July, averting a potential default. With national elections scheduled for February, the country is witnessing a reduction in political and economic uncertainty. Inflation, a key concern, has also exhibited signs of cooling, providing the central bank with flexibility after implementing interest rate hikes over the past two years.
Mattias Martinsson, the Chief Information Officer at Tundra Fonder AB, a Stockholm-based frontier market investor, highlighted that foreign investors are considering diminishing political and economic uncertainty. He noted the emergence of political stability alongside improving economic indicators and the likelihood of significant cuts in the policy rate during 2024.
While the stock rally continues to attract bullish sentiment, Ali Khalpey, Head of Equity Capital Markets at EFG Hermes in Dubai, emphasizes Pakistan’s attractiveness compared to other emerging markets. He anticipates a persistent foreign cash inflow, citing the appeal of Pakistani stocks such as Lucky Cement Ltd., United Bank Ltd., and Habib Bank Ltd., which offer cost-effectiveness, high quality, and attractive dividend yields.
Simultaneously, Pakistan’s sovereign dollar bonds are delivering robust returns, among the best in emerging markets this month, approaching 15 per cent total returns. On Wednesday, these bonds outperformed their counterparts in developing nations.
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