KSE-100 Index expected to deliver 55.5% return in 2025: report

The Pakistan Stock Exchange’s (PSX) KSE-100 Index is forecasted to sustain its upward momentum in 2025, driven by declining interest rates reaching single digits. 

According to AKD Securities, the index is expected to post a strong return of 55.5% in the coming year, supported by robust profitability in the fertilizer sector, improved sustainable return on equity (ROE) in banking, and enhanced cash flows in exploration and production (E&P) companies and oil marketing companies (OMCs), all benefiting from falling fixed-income yields.

The market experienced volatility throughout the week, driven by portfolio adjustments and realignments at year-end. However, the bullish momentum prevailed, leading the KSE-100 index to a weekly gain of 1,838 points, closing at 111,351 points, reflecting an increase of 1.68%WoW. 

Major contributing sectors to this rally were commercial banks, contributing 780 points, followed by Oil & Gas Marketing Companies with 336 points and investment banks, and securities firms, which added 313 points. 

Moreover, T-bill yields in the recent auction remained largely flat, clocking in at 12% for the 3-month and 6-month paper. On the macroeconomic front, the current account reported a surplus of US$729mn, taking the 5MFY25 balance to a surplus of $944 million. SBP held forex reserves decreased by $228 million WoW, ending the week at US$11.9bn as of Dec 20th, 2024. Average Daily Trading Volume remained lower, down by 31.0% WoW, clocking in at 796 million shares, compared to 1.2 billion shares traded in the earlier week.

The Pakistani rupee remained stable against the US dollar throughout the week, closing at 278.47 PKR/USD. Key developments during the week included a 14% year-on-year surge in exports to the European Union during the first five months of FY25, reaching $4.8 billion. Additionally, the Senate panel endorsed legislation to close bank accounts of non-filers holding balances exceeding PKR 1 million, while the Federal Board of Revenue announced a crackdown on tax evaders. 

The government reaffirmed its target to achieve a 13.5% tax-to-GDP ratio within three years, and Pakistan International Airlines revealed plans to acquire eight new planes next year.

Sector-wise performance for the week highlighted notable gains in Jute, Leasing Companies, Property, Oil & Gas Marketing Companies, and Glass & Ceramics, with Jute leading the rally with a 34.8% increase. Conversely, the Exchange-Traded Fund, Textile Spinning, Vanaspati & Allied Industries, Transport, and Woollen sectors experienced declines, with Exchange-Traded Funds dropping by 12.2%.

In terms of market flows, significant net selling was observed from Other Organizations, recording an outflow of $9.3 million. However, Individuals absorbed much of this selling pressure with a net inflow of $15.0 million. 

Among companies, top performers included PGLC, which rose by 46.5% during the week, followed by TRG, DAWH, JVDC, and FCEPL, with gains of 32.3%, 13.2%, 13.2%, and 11.5%, respectively. On the other hand, PKGP, CHCC, ATRL, BNWM, and SCBPL were the laggards, with PKGP recording a 9.5% weekly decline.

Currently, the KSE-100 is trading at a price-to-earnings (P/E) ratio of 6.0x, which remains below its 10-year historical average, despite achieving an impressive cumulative return of 130% over the past two years.