Karachi, August 26, 2023 – The Pakistan stock market may see a boost in the coming week, driven by the anticipation of robust corporate results.
Analysts at Arif Habib Limited are optimistic about specific sectors and stocks that are well-positioned to capture investor interest, primarily due to expectations of strong financial performance.
Analysts have expressed their belief in a positive market stance for the upcoming week, citing changes in the MSCI-FM 100 index as a potential catalyst for market momentum. Pakistan’s weight within this index has experienced a minor increase, which is expected to play a role in bolstering market confidence.
The benchmark KSE-100 index of the Pakistan Stock Exchange (PSX) is currently trading at a Price-to-Earnings Ratio (PER) of 3.7x for 2024, compared to its five-year average of 5.8x. Additionally, it offers a dividend yield of approximately 10.4 percent, as opposed to its five-year average of around 6.7 percent. These valuation metrics suggest that the market may be undervalued, which could attract investors seeking value opportunities.
The local stock market witnessed a mixed trend during the previous week, influenced by various developments on both the political and economic fronts. Notable events included Pakistan’s current account deficit for July 2023, which amounted to USD 809 million, marking a significant 36 percent year-on-year decrease from July 2022 when the current account deficit had reached USD 1.26 billion.
Furthermore, the government successfully raised over PKR 2.1 trillion through the auction of T-bills, and Pakistan received USD 6.49 billion through its Roshan Digital Account (RDA). However, it’s worth noting that the State Bank of Pakistan’s reserves decreased by USD 125 million during the week, reaching USD 7.9 billion. Additionally, the Pakistani Rupee depreciated against the US dollar, closing at PKR 301, a record low, and losing PKR 5.22, equivalent to a 1.7 percent weekly depreciation.
The market’s performance was influenced by various sectors. Negative contributions came from the fertilizer, food & personal care products, cement, technology & communication, and pharmaceuticals sectors. In contrast, the commercial banks and oil & gas exploration sectors made positive contributions.
Foreigner buying continued during the week, totaling USD 1.7 million, compared to a net buy of USD 2.4 million in the previous week. Major foreign buying was observed in the technology and communication sector (USD 0.8 million) and commercial banks (USD 0.6 million). On the local front, selling was reported by individuals (USD 8.2 million), followed by banks and Development Financial Institutions (DFIs) (USD 8.2 million).
Average trading volumes during the week stood at 232 million shares, a decline of 32.6 percent week-on-week (WoW), while the average value traded settled at USD 32 million, down by 36 percent WoW.
As Pakistan’s stock market prepares for the upcoming week, investor attention will undoubtedly focus on corporate results and their potential impact on market dynamics. The ongoing interplay of economic, political, and global factors will continue to shape the course of the market.