In a noteworthy transformation, the Pakistan Stock Exchange (PSX) rebounded from a three-year low early in 2023 to culminate the year as the world’s top-performing bourse. This resurgence was underpinned by a $3 billion International Monetary Fund (IMF) loan program, the elimination of default risks, and the successful completion of the initial IMF review.
The KSE-100 index, a benchmark for market performance, experienced an impressive growth of 55%, reaching a 14-year high and concluding at 62,451 points on December 29. The market had previously slumped to its lowest point in three years at 38,136 points in January, marked by political instability and economic challenges.
The turning point came as foreign investors re-entered the market after a three-year hiatus, coinciding with the stabilization of the rupee-dollar exchange rate. This resurgence instilled confidence among investors, contributing to the remarkable turnaround.
The year 2023 unfolded as a dynamic period, setting records as the bourse soared to a historic high of 67,094 points in December. Optimism prevailed due to expectations of a forthcoming reduction in the central bank’s key policy rate from its record high of 22%, coupled with attractively low share prices relative to their previous peaks.
However, the market witnessed a significant correction in the last week of December, with a staggering 2,534-point drop (4.11%) in a single day. This abrupt decline was attributed to panic selling by investors who had acquired stocks through expensive borrowing. The correction followed a remarkable 65% surge in the KSE-100 index over the preceding six months, bringing it to a record high.
Topline Research, citing Bloomberg data, reported that in the second half of 2023, the PSX emerged as the best-performing market, registering gains of 51% in rupee terms and 54% in US dollars. For the full year, the benchmark KSE-100 index earned the distinction of being the third-best performing market in local currency, ranking 14th globally in 2023 in terms of returns in US dollars, according to Arif Habib Limited (AHL).
Topline Research highlighted that the second half of 2023 witnessed improved investor sentiment, attributed to a better-than-expected IMF standby arrangement (SBA), the successful completion of the first IMF review, a stable currency, and the announcement of upcoming elections.
After a three-year hiatus, foreign corporate investors turned net buyers in 2023, recording net buying of $73 million—the highest in eight years. This marked a stark contrast to the preceding three years (2020-2022), during which foreign investors had divested shares worth $1.1 billion.
A substantial increase in trading activity complemented the PSX’s swift recovery. Average volumes in the ready/cash market surged by 41% to 323 million shares per day, the highest since 2021. Similarly, the average traded value rose by 45% to Rs10 billion daily in the cash market, reaching the highest levels since 2021. In the futures market, total traded volumes and value per day increased by 17% and 24%, respectively, to 110 million shares and Rs4.5 billion. AHL Research noted that investor confidence rebounded in the second half of 2023 following the IMF SBA in June, leading to a surge in investment flows to the market.