Karachi, December 30, 2023 – Financial analysts at Arif Habib Limited are optimistic about the prospects for the Pakistan stock market as the New Year approaches, anticipating that bulls will likely take control from the beginning of the week.
In a recent report, analysts suggest that the local bourse is expected to stay in the green zone, with an anticipated influx of fresh liquidity attributed to the “January effect.” The current attractive valuations of various scrips are also expected to contribute to a positive sentiment on the index.
The benchmark KSE-100 index of the Pakistan Stock Exchange (PSX) is presently trading at a Price to Earnings Ratio (PER) of 4.2x (2024), compared to its 5-year average of 5.9x. Additionally, it offers a dividend yield of approximately 10.7 percent, exceeding its 5-year average of approximately 6.0 percent.
Earlier in the week, the market experienced a brief downturn due to profit-taking by investors, resulting in a significant reduction in leveraged positions and a 2,534-point drop Day-on-Day (DoD) on the first day of the week.
However, this bearish momentum was short-lived, as the market rebounded the following day by 1,693 points, marking the third-highest increase in its history. Contributing factors to this recovery include an increase in State Bank of Pakistan (SBP) reserves by USD 853 million, reaching USD 7.8 billion due to inflows from international creditors. The government also disbursed PKR 131 billion and PKR 57 billion to government-owned power plants and K-Electric, respectively.
Furthermore, the Asian Infrastructure Investment Bank approved USD 250 million for the RISE-II development policy framework in Pakistan. A bilateral legal framework for Saudi investment was also agreed upon between Pakistan and Saudi Arabia. The PKR/USD exchange rate strengthened by PKR 0.67, amounting to a 0.24 percent increase, settling at PKR 281.86. Consequently, the KSE-100 closed at 62,451 points, gaining 746 points (1.21 percent) Week-on-Week (WoW).
Sector-wise positive contributions were observed from Commercial Banks (369 points), Cement (224 points), Fertilizer (148 points), Food & Personal Care (40 points), and Leather & Tanneries (39 points). Meanwhile, the sectors mainly contributing negatively were Oil & Gas Exploration Companies (71 points), Technology (44 points), Automobile Assembler (42 points), Miscellaneous (38 points), and Oil & Gas Marketing Companies (35 points).
Scrip-wise positive contributors included MEBL (143 points), UBL (106 points), EFERT (80 points), LUCK (64 points), and MCB (60 points). Conversely, HBL (91 points), PPL (57 points), PSEL (46 points), TRG (43 points), and PSO (34 points) were among the scrip-wise negative contributors.
Foreigner selling was witnessed during the week, amounting to USD 1.9 million compared to a net buy of USD 2.7 million the previous week. The major selling occurred in Banks (USD 1.6 million) and Textile (USD 0.5 million). On the local front, buying was reported by Insurance (USD 4.3 million) followed by Banks (USD 2.9 million). Average volumes amounted to 652 million shares, down by 46 percent WoW, while the average value traded settled at USD 62 million, reflecting a 20 percent decline WoW. As the market prepares to welcome the New Year, investors are closely watching for the continuation of this positive momentum into the upcoming trading sessions.
