Karachi, The Karachi Stock Exchange's KSE100 Index stood out as one of the best performing indices in the region for November 2023, achieving a significant monthly return and reaching new all-time high levels. This performance was driven by robust investor participation and several positive economic indicators.
According to JS Research, the KSE100 Index recorded a 16.6% monthly return, marking a 43-month high for Pakistan's stock exchange. The high levels of investor participation were evident in the turnover, which reached a 29-month high in both average value and volume traded, with a daily average of US$73 million and 654 million shares. Additionally, net buying from foreign investors touched a six-year high at US$34 million.
The optimism in the market was fueled by a variety of factors, including the successful conclusion of the first IMF review at the staff level, a decline in oil prices, trimmed secondary market yields in anticipation of a potential monetary easing cycle, and the timely announcement of gas price hikes. Cyclical sectors such as textiles, autos, glass, steel, cement, and food & allied sectors outperformed the broader market. Notably, Pak Suzuki Motors (PSMC) saw a significant increase in its stock price due to the sponsors' intention to de-list the company from the local bourse. Additionally, Lucky Cement (LUCK) concluded a 20 million shares buy-back within the month.
On the external front, the IMF staff-level meeting with Pakistan's government officials concluded positively, with the IMF supporting the initiatives taken by the Pakistani government towards fiscal consolidation and other reforms. This positive development paves the way for Pakistan to receive the second tranche of US$700 million in December 2023. Furthermore, the Saudi Fund for Development agreed to roll over Pakistan's US$3 billion deposit for another year.
The market's capitalization now stands at Rs 8.7 trillion, reflecting a positive contribution from price changes and indicating that the market has started pricing in earnings growth of the last seven years. Despite the market's price-to-earnings (P/E) ratio re-rating from 2.8x in October 2023 to 4x by the end of November, current prices still offer potential for capital gains, in addition to dividend yields. JS Research continues to favor high dividend-yielding stocks, with top picks offering annual dividend yields of 16% to 24%.