Karachi, January 6, 2024 – Investors in the Pakistan Stock Exchange (PSX) are gearing up for a week of potential market shifts as the International Monetary Fund’s (IMF) executive board is set to convene on January 11, 2024.
Analysts at Arif Habib Limited suggest that the outcomes of this meeting could significantly influence the trajectory of the Pakistani stock market.
The focal point of the anticipated board meeting is the expected approval for the disbursement of a substantial $700 million tranche under the first review of the Stand-By Arrangement (SBA) program. This move would elevate the overall funding to Pakistan to a significant $1.9 billion. Investors are keenly watching this development as it has the potential to inject additional liquidity into the market.
Stocks currently trading at attractive valuations are poised to benefit from this anticipated influx of liquidity, presenting potential opportunities for investors seeking value. The benchmark KSE-100 index of the PSX, currently trading at a Price-to-Earnings Ratio (PER) of 4.4x (2024), compared to its 5-year average of 5.9x, offers a dividend yield of approximately 10.3 percent, surpassing its 5-year average of around 6.0 percent.
The first week of the new year saw the Pakistani stock market displaying notable resilience. On Monday, the market experienced a significant surge of 2,211 points, recording the second-highest absolute point increase and marking the highest surge on the first working day of a new year.
Positive economic indicators further bolstered market sentiment. The Federal Board of Revenue achieved a historic one-month tax collection of PKR 984 billion, accompanied by a substantial 40.1 percent Year-over-Year reduction in the trade deficit for December 2023. However, concerns arose as the headline inflation number for December 2023 reached 29.7 percent Year-over-Year. On a positive note, the State Bank of Pakistan’s reserves reached USD 8.2 billion, the highest level since July 14th, 2023, and the PKR/USD exchange rate strengthened by PKR 0.46, representing a 0.16 percent increase and settling at PKR 281.4. Overall, the KSE-100 closed at 64,515 points, gaining 3.3 percent Week-over-Week.
Sector-wise, positive contributions to the market came from Oil & Gas Exploration Companies (587 points), Commercial Banks (392 points), Fertilizer (315 points), Cement (185 points), and Power Generation & Distribution (166 points). Conversely, negative contributions were observed in Miscellaneous (13 points), Glass & Ceramics (3.2 points), Inv. Banks (1.3 points), Modarbas (1.0 points), and Leasing Companies (0.1 points).
Foreigner selling was a notable feature during the week, amounting to USD 3.1 million compared to a net sell of USD 1.9 million the previous week. Major selling activities were observed in Exploration & Production (USD 1.95 million) and Banks (USD 1.0 million). On the local front, buying was reported by Other Organizations (USD 5.5 million) followed by Banks (USD 5.4 million). Average trading volumes increased by 5.4 percent Week-over-Week, reaching 687 million shares, while the average value traded settled at USD 69.6 million, reflecting an 11.6 percent increase Week-over-Week.
As the IMF board meeting approaches, market participants are on high alert, ready to respond to potential changes that may follow the decision on the disbursement of the tranche under the SBA program. The outcome of this meeting is expected to shape the trajectory of the Pakistan Stock Market in the coming weeks.
