Lately, Pakistan Stock Exchange (PSE) has been creating records on daily basis. During the past week ended on December 06, 2024 the benchmark index, registered its highest ever weekly point gains of 7,697 and market closed at a record high of 109,054 points, up 7.6%WoW. The bullish momentum was fueled by inflation recorded at 4.9%YoY, lowest in nearly six and half years, fueling expectations for continued monetary easing in the upcoming Monetary Policy Committee scheduled for December 16, 2024.
During the week under review, major contributing sectors to this rally were commercial banks, followed by Fertiliser, and Oil & Gas Exploration. Interest in the banking sector continued to rise, with gross advances increasing by 21%YoY as of November 15, 2024, taking the ADR to 46.9%, with expectations of crossing the 50% threshold before the year-end to avoid ADR-based taxation.
To celebrate the easing tend at the PSX a Gong Ceremony was held on Tuesday to formally welcome Ahsan Iqbal, Federal Minister for Planning, Development, and Special Initiatives. The gong was struck by the Minister to open the trading day.
Present on the occasion were PSX Chairperson Dr. Shamshad Akhtar, MD & CEO of the Exchange Farrukh Sabzwari, PSX Board Members, PSX Management, senior bankers, members of the capital market fraternity, key stakeholders, and distinguished guests.
Dr. Shamshad Akhtar welcomed the distinguished guests, stating, “Ahsan Iqbal has been a voice for developing countries at the United Nations,” and praised his contributions to global and national economic progress. She highlighted PSX’s remarkable performance, noting the crossing of the 100,000-point mark last week as a testament to Pakistan’s potential.
Ahsan Iqbal congratulated the PSX Board and Management. “Crossing the 100,000 mark in the KSE-100 Index showcases Pakistan’s potential to the world. It is a moment of pride that highlights Pakistan’s economic resilience,” he said.
He emphasized that the government’s economic policies have steered the country towards stability. “Inflation has dropped from 38% to below 5% in two years, and the stock market has soared from 30,000 to 100,000 points,” he stated.
Prominent representatives from brokerage houses, asset management companies, and senior bankers attended the ceremony, which also served to recognize the collective efforts of all stakeholders in achieving this significant milestone.
Another worthy contribution of the PSX has been that the GoP raised PKR2 trillion in 2024 using its platform. The major achievement was that yields across the tenors remained lower than conventional papers.
During 2024, the GoP raised this amount from Sukuk auctions using PSX auction system in 15 total auctions. The largest quantum of funds was raised in last auction of 2024, which took place on December 03 2024, fetching PKR353 billion with 60% funds raised in 10 year Sukuk. Tenor wise, 38% of the funds or PKR0.8 trillion were raised in 5-year Sukuk, of this variable rate Sukuk were 74% and fixed rate were 26% respectively. The second largest amount was raised in one-year discounted Sukuk amounting to PKR548 billion or 28% of the total raised amount.
In 10-year and 3-year Sukuk, the GoP raised 19% and 16% of the funds raised in PSX Sukuk auction system during 2024. In all the 15 auctions the GoP received participation of PKR6.2 trillion against total target of PKR2.1 trillion and raised amount of PKR2.0 trillion.
Cut-off yields on 12-month Sukuk remained at an average lower by 90bps than conventional 12-month T-Bills with highest discount of 184bps witnessed on November 06, 2024 Sukuk auction in which government raised second highest amount of PKR339 billion with PKR116 billion from 12-month Sukuk. Yield on one-year Sukuk came down from 19.5% to 10.99%.
Cut-off yields on 3/5/10 year Sukuk at an average have remained lower by 60/9bps/nil than conventional 3/5/10 Year PIBs secondary market yield on the date of auction with highest discount of 82bps was witnessed in May 09, 2024 auction. Cut-off yields on 3/5/10 year Sukuks came down by 134-455bps in 2024.
In October 2023, the Care Taker Federal Cabinet granted its approval to amend the Government of Pakistan Market Treasury Bills 1998 and Government of Pakistan Ijara Sukuk Rules 2008. These amendments aimed to enhance the efficiency and provide flexibility for issuance, registration, trading and transfer of Government Securities through any institution.
These changes were also supposed to help the Government to expand its investor base, make participation easier for diversified investors i.e. retail etc. and eventually reducing the cost of borrowing by enhancing the subscribers’ base.
In line with these changes, GoP conducted first primary auction of one-year discounted GOP Ijara Sukuk (GIS) through PSX auction system on December 08, 2023 with target of PKR30 billion.
In the first auction in 2023, Government received bids of PKR396 billion (realised value) with rental rate of 18.5-33.42% for one-year GIS, 13x of the amount targeted by Govt. However, Government picked up PKR28.9 billion at cut-off rental rate of 19.5%. At that time, in secondary market, one-year T-Bill was yielding 21.2%, thus reducing Government cost by over 150bps. Since then all auctions of 1 year GIS Sukuk are done through PSX auction system.
Thereafter, first auction of the 3-year and 5-year GIS in both variable (VRR) and fixed rate (FRR) were conducted on January 23, 2024 alongside the one-year discounted GIS. The target set for 3-year and 5-year (in both VRR and FRR) was PKR60 billion cumulatively.
However, auction witnessed participation of PKR296 billion in first auction of 3-year and 5-year Sukuk, 5x of the target. Government picked up PKR81 billion in this auction for 3-Y and 5-Y maturity Sukuk. The fixed rate Sukuk cut-off was 16.05% and 15.49% for 3-Year and 5-Year, respectively 2-79bps lower than secondary market 3-Year and 5-Year PIBs rate of 16.84% and 15.51%, respectively.
On floater side, in the first auction the spread over the reference rate was +15bps, while this spread lowered further in subsequent auction.