KARACHI: With Pakistan’s stock market trading at historic levels, its robust performance has benefitted small investors who have earned approximately 80 percent returns on their investments, according to investors and brokers on Wednesday.
The country’s equity market has experienced an unprecedented surge, setting new records at a remarkable pace since June last year, after Pakistan secured a $3 billion short-term bailout program from the International Monetary Fund (IMF).
Within a span of a year, the benchmark KSE100 index has soared by over 85 percent, marking its swiftest recovery witnessed in over two decades. Last week, it breached 75,000 points for the first time in history.
According to stock analysts and brokers, the historic performance of the country’s bourse has been a blessing for people trading in the market, especially small investors.
“They [the small investors] are very happy,” Shahid Ali Habib, CEO of Arif Habib Limited, a Karachi-based brokerage firm, told Arab News. “I think if you ask any small investor today definitely, they are happy because the market has given them 78-79 percent of returns in the last 9-10 months.”
Pakistan was brought back from the brink of sovereign debt default last June, though the IMF loan provided a new lifeline to the country and revitalized the equity market.
Habib said many retail or small investors who had been putting their money in fixed income could not benefit from the recent market performance and had only made 20-22 percent returns.
Despite giving 78-79 percent performance, the stock market still remains attractive in terms of price earning multiple and price to book since the profitability of companies has grown substantially.
“In 2019, our total profitability of all the listed companies was around Rs600-700 billion, but today it is Rs1.4 trillion,” he continued. “So, we have seen a lot of growth in the profitability of the companies, and this is the reason that the price earning multiple is coming down.”
Muhammad Tariq, a broker and investor, agreed the current market performance had made investors happy, but he pointed out not every share has performed well.
“Small investors are happy to some extent, but it’s not the case that every scrip within the 75,000 index has moved,” he said.
Tariq hoped the shares which did not perform well in the past would do better in the coming days to make everyone benefit.
“Some scrips are still stagnant and in the coming days, they too will perform well, because as there is a saying that when it rains, every place gets some drops,” he added.
Abdul Rauf, an investor, said those who were dealing in ready delivery of shares had earned very well and even recovered their losses.
“Small or big investors who dealt in ready deliveries of shares 10-15 days they earned very well, enough to cover their previous losses,” Rauf told Arab News.
However, at historic high levels, Abdul Rauf advised other investors to remain cautious due to high volatility linked with upcoming fiscal budget.
“You should keep your capital flexible so that after June, when the results [of budget] are out, you can start new buying,” he said, adding: “Since the 75,000 mark has been crossed for the first time in Pakistan’s history, a bit of caution is advisable.”
Pakistani analysts said the stock market’s continued performance would be contingent on the outcome of talks between Pakistan and the IMF along with economic improvement including easing of the inflationary pressure.
“The flurry of activity in Pakistan’s stock market reflects a surge of enthusiasm and optimism among investors,” Topline Security said in its report last week. “The index could reach 87,000 by December 2024 and 106,000 by June 2025.”
Amid high trading at higher level, analysts advised small investors to take a long-term investment view to make decent returns on equity investment instead of other asset classes.
“I think for a small- to medium-term investor, if they take a year to two-year view in making investment in the equity market, then definitely they can make decent returns compared to other asset classes,” Habib said, adding the investors could get 25-30 percent of annualized return if they took a long-term view of the situation.
