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Pakistan Stock Market Outlook & 2024 Projections– Anticipated to surpass the 80,000 mark by the close of 2024, Pakistan’s stock market is poised for growth, propelled by ongoing economic reforms, monetary easing, and enhanced macroeconomic indicators. As outlined in a research report from AKD Research, the market’s trajectory throughout 2024 will be marked by volatility, chiefly influenced by two critical checkpoints: external funding facilities, particularly the IMF program, and the impending general elections in early February 2024.
These pivotal events, while introducing fluctuations, also present opportunities for investors to acquire stocks at attractive valuations, given the current multi-year low price-to-earnings (P/E) ratios in the market. Projected to commence from March onwards, a noteworthy reduction of 500 basis points in interest rates during 2024 is expected, spurred by easing inflationary pressures and a deceleration in money supply growth. Forecasts indicate a decline in the average consumer price index (CPI) from 25.3% in 2024 to 11.5% in 2025.
The ensuing lower interest rates are poised to benefit cyclical and leveraged sectors, including cement, steel, fertilizers, and the banking sector, which stands to gain from elevated net interest margins and reduced provisioning costs. The report underscores positive economic undercurrents resulting from recent measures implemented by the caretaker government, encompassing fiscal consolidation, exchange rate stability, and structural reforms.
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Projections in the report estimate a fiscal deficit of 7.0% of GDP in 2024, with the external funding gap of $4-5 billion expected to be addressed through support from Saudi Arabia, China, and the UAE. Nevertheless, the uncertainty surrounding external funding, especially the status of a new IMF program, remains a significant risk factor, crucial for bridging the net funding gap of US$4-5 billion over the next 12 months.
The report advocates a bullish stance on the stock market, emphasizing three key factors: the ongoing economic reform process, monetary easing, and the currently reasonable valuations. A diversified portfolio of stocks is recommended by the brokerage house, with an expectation that they will outperform the market in 2024, based on their strong fundamentals, growth potential, and favorable valuations. Preferred sectors for investment include banks, oil and gas, oil marketing companies, power, and cyclicals.
The top picks endorsed by the report comprise Meezan Bank, United Bank, MCB, Bank Alfalah, Hub Power Company, Oil and Gas Development Company, Mari Petroleum, Pakistan State Oil, Attock Petroleum, Lucky Cement, Maple Leaf Cement, Fauji Cement, Mughal Iron and Steel Industries, Fauji Fertilizer, Engro Fertilizers, and Fauji Fertilizer Bin Qasim.