KARACHI: Pakistani banks led their Asia-Pacific peers in posting some of the highest stock returns in the three months ended December 31, 2023, after a stock rally on the Pakistan Stock Exchange (PSX) pushed the local benchmark index to record highs, according to S&P Global Market Intelligence.
Bank AL Habib Ltd. topped the quarterly ranking of 15 best-performing bank stocks in the Asia-Pacific featured on S&P Global Market Intelligence in the fourth quarter of 2023. Of the 11 Pakistani banks on the list, Bank Al Habib posted the highest total returns of 89.96% during the quarter. Overall, Pakistani banks occupied four of the top five slots in the ranking.
Pakistan’s Askari Bank Ltd. took the second spot with total stock returns of 59.48%, followed by Habib Metropolitan Bank Ltd. and Faysal Bank Ltd. with returns of 51.56% and 48.85%, respectively. Indonesia’s PT Bank Jago Tbk filled the fifth place with total returns of 43.56% in the October-to-December quarter.
“We expect the rally in Pakistan stocks to continue due to expected monetary easing, stable currency, and improved governance post-elections given the fact that the market is still trading at a low price to earnings,” said Awais Ashraf, director at Akseer Research, noting that the key stock price valuation ratio is near 3.1 times.
The “big weights” listed on PSX such as energy firms involved in exploration and production and banks will benefit the most from restrictions on the government that the International Monetary Fund (IMF) has placed as part of a bailout package, Ashraf said.
PSX emerged as one of the best-performing bourses in the region in the fourth quarter after the IMF reached a staff-level agreement with Pakistan in November 2023 on the first review of a $3 billion stand-by arrangement. Subject to the approval of the IMF’s executive board, the review gave the Pakistani government access to about $700 million in funding.
The stock rally also helped improve investor confidence amid the government’s economic reform initiatives as part of the IMF loan program and reduction in economic uncertainties. PSX’s benchmark index, the KSE 100, surged more than 35% in the 2023 fourth quarter to close at 62,451.04.
Pakistan’s economy is improving, as reflected in its latest gross domestic product figures. The country’s GDP grew 2.13% in the July-September 2023 quarter, a sharp increase from a 2.7% contraction in the previous quarter, estimates by the Pakistan Bureau of Statistics showed. The IMF said in October 2023 that Pakistan’s GDP is set to grow 2.5% in 2024 after an expected 0.5% contraction in 2023.
Pakistan’s Meezan Bank Ltd., MCB Bank Ltd., National Bank of Pakistan, United Bank Ltd., Standard Chartered Bank (Pakistan) Ltd., Bank Alfalah Ltd., and Habib Bank Ltd. also made it into the ranking, along with India-based The Karur Vysya Bank Ltd. and CSB Bank Ltd.
Chinese banks occupied eight of the 15 slots on the list of 15 worst-performing Asia-Pacific bank stocks by total returns during the most recent quarter. The remaining slots were taken by Indian, Australian, Vietnamese, New Zealand, Japanese and Indonesian banks.
Shengjing Bank Co. Ltd.’s stock plunged the most, by 85.66%, in the quarter ended Dec. 31, 2023, followed by Jilin Jiutai Rural Commercial Bank Corporation Ltd. with a 51.83% drop and Bank of Gansu Co. Ltd. with a 39.66% decline, Market Intelligence data shows.
The decline in Chinese banks’ stocks in the fourth quarter was broadly in line with the performance of the local stock exchanges. The Shanghai Stock Exchange’s SSE Composite Index, for instance, fell more than 4% during the quarter.
