Karachi, May 11, 2024 – Topline Securities Limited, a leading brokerage firm, has released new projections for the benchmark KSE-100 index of the Pakistan Stock Exchange (PSX), foreseeing significant growth in the coming months.
According to a research report by analysts at Topline Securities, the KSE-100 index is expected to surge to 87,000 points by December 2024 and reach an impressive 106,000 points by June 2025.
The analysts base their optimistic outlook on various factors, including Pakistan’s successful completion of a $3 billion stand-by agreement with the International Monetary Fund (IMF) and the initiation of talks for a new IMF program, Extended Funding Facility (EFF).
The revision in the KSE-100 index targets is attributed to the anticipated positive impact of these developments on the country’s economic stability and investor confidence. Topline Securities projects the index to rise to 4.6 times its current value by June 2025, reflecting the overall bullish sentiment in the market.
The research report highlights the expectation that Pakistan’s price-to-earnings (PE) ratio, currently at 3.7 times, will gradually revert to its historical average of 6.93 times over the next three years of the IMF program (July 2024 – July 2027). However, this projection is subject to the successful implementation of the program and adherence to its conditionalities regarding fiscal and monetary discipline, as well as structural reforms.
In terms of economic indicators, Topline Securities forecasts real GDP growth in the range of 3.5% to 4.0% for the fiscal year 2025, up from earlier estimates of 3.5%. This upward revision factors in the government’s crop targets for the next season and slight adjustments in services numbers, considering negligible growth in recent years.
Furthermore, the report predicts a significant decrease in inflation, estimating an average of 13.0% to 13.5% during FY25, compared to FY24’s inflation rate of 24.4%. This projection incorporates various factors such as hikes in power tariffs, rent, wheat prices, fuel prices, and gas tariffs.
In response to the expected decline in inflation, Topline Securities anticipates cumulative interest rate cuts of 500 to 600 basis points by June 2025, with interest rates potentially falling to 16% to 17%. This scenario assumes a real interest rate of 300 to 400 basis points.
Identifying potential investment opportunities, the report highlights sectors such as high leverage, pharmaceuticals, consumer goods, and companies addressing circular debt issues as ones likely to attract investor attention in the next 12 months due to expected monetary easing and lower inflation.
As investors navigate these projections, they are advised to exercise caution and conduct thorough research before making investment decisions, considering the inherent risks associated with market fluctuations and economic uncertainties.