KARACHI: The benchmark of major shares hit an all-time high on Friday as stock prices rose owing to declining yields on treasury bonds.

The KSE-100 index closed at 53,123.04 points after gaining 466.28 points or 0.89 per cent from the preceding session.

Topline Securities Ltd attributed the upswing in the KSE-100 index to a drop of 25-41 basis points in the yields on treasury bills in an auction held during the outgoing week. The southward movement in yields was in reaction to the latest monetary policy announcement in which the central bank kept the policy rate unchanged at 22pc.

The index topped its previous high of May 2017 in a months-long rally that went into high gear in June this year. As a result, the KSE-100 index became the world’s best-performing in dollar terms since the end of August among more than 90 equity indexes tracked by Bloomberg.

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Speaking to Dawn on Friday, Arif Habib Ltd Head of Research Tahir Abbas said he expects stock prices to scale new heights in the coming months.

“Corporate earnings have gone up but share prices haven’t risen accordingly,” he said while referring to a low price-to-earnings (P/E) multiple — an oft-cited investing benchmark that measures a company’s share value relative to its per-share income.

Index-wise, the P/E multiple is currently hovering at four. In simpler words, it means the constituent stocks of the KSE-100 index are trading at a multiple of four times their collective earnings.

Six years ago when the index hit its preceding high, the P/E multiple was around 12 — three times higher than the current level. This means major shares are up for grabs at a significant discount today compared to the 2017 level.

Mr Abbas said his brokerage expects the index to reach 65,000 points by the end of June 2024 assuming no surprises on the macroeconomic front. “The rally should endure as the multiple gradually moves closer to the five-year average of 6.5,” he said.

The top reason for the rise in share prices in the last few months has been the Stand-by Arrangement with the International Monetary Fund in June that unlocked $3 billion in multiple tranches.

Another key contributor to the upbeat sentiment among investors is robust corporate income. Earnings of listed companies rose 46pc year-on-year in the first nine months of 2023 while the increase was a whopping 66pc in the July-September quarter alone.

Similarly, higher dividends — up 42pc year-on-year in January-September — coupled with a share buyback spree in which listed companies have purchased their own shares worth Rs41bn since May 2022 also helped sustain the positive momentum.

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Securities Management Exchange Suite Ltd CEO Sani-e-Mehmood Khan told Dawn the recent upswing in share prices should carry on as long as the government sticks to the path of economic stability while steering clear of populist measures.

“Barring any unforeseen events, nothing is stop­ping the index from reaching 70,000 points in the months ahead,” he added.

The overall trading volume on Friday increased 7.1pc to 509.1 million shares. The traded value incr­eased 6.9pc to Rs15.5bn on a day-on-day basis.

Stocks contributing significantly to the traded volume included Kohinoor Spinning Ltd (43.1m shares), Pakistan Refinery Ltd (41.8m shares), TPL Properties Ltd (29m shares), Pakistan Interna­tional Bulk Term­inal Ltd (17.4m shares) and WorldCall Telecom Ltd (15.5m shares).

Companies registering the biggest increases in their share prices in absolute terms were Rafhan Maize Products Company Ltd (Rs194.90), Nestle Pakistan Ltd (Rs100), Sapp­hire Fibres Ltd (Rs63.72), Bata Pakistan Ltd (Rs58.70) and Pakistan Tobacco Company Ltd (Rs47.62).

Foreign investors were net sellers as they offloaded shares worth $0.64m.

Published in Dawn, November 4th, 2023