Karachi, March 23, 2024 – Following the recently concluded successful talks between the International Monetary Fund (IMF) and Pakistan, analysts predict that positive momentum will be bolstered at Pakistan stocks during the upcoming week starting March 25, 2024.
Analysts at Arif Habib Limited have highlighted that with the successful staff level agreement of the IMF’s Stand By Arrangement (SBA) program for the final tranche, the Government has initiated talks with the IMF for an Extended Fund Facility (EFF) program. Any developments in this regard are expected to further enhance positive momentum at the stock index.
Furthermore, stocks are currently trading at attractive valuations, which could entice investors looking for lucrative opportunities.
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 5.6x, offering a dividend yield of approximately 10.5 percent as opposed to its 5-year average of around 7.6 percent.
At the start of the week, the market exhibited mixed trends as investors maintained a cautious stance awaiting the monetary policy announcement. However, following the Monetary Policy Committee’s announcement of an unchanged policy rate at 22 percent and the signing of a staff level agreement with the IMF, market sentiment saw a revival.
In terms of economic indicators, Pakistan’s current account reported a surplus of USD 128 million in Feb’24, compared to a deficit of USD 303 million in the previous month (Jan’24). Additionally, the State Bank of Pakistan’s foreign exchange reserves surged by USD 105 million, crossing the USD 8.0 billion mark. On the flip side, foreign direct investment (FDI) declined by 17 percent Year-on-Year (YoY) in the 8MFY24, amounting to USD 821 million. The Pakistani Rupee (PKR) closed at 278.14 against the US Dollar, strengthening by PKR 0.60 | 0.22 percent Week-over-Week (WoW). Overall, the market closed at 65,152 points, increasing by 335 points | 0.52 percent WoW.
Sector-wise positive contributions were led by i) Fertilizer (475 points), ii) Commercial Banks (309 points), iii) Paper & Board (34 points), iv) Automobile Assemblers (29 points), and v) Tobacco (21 points). Conversely, sectors negatively contributing included i) Cement (244 points), ii) Oil & Gas Exploration Companies (156 points), iii) Technology & Communication (40 points), iv) Refinery (30 points), and v) Food & Personal care products (24 points).
Scrip-wise positive contributors included DAWH (212 points), MEBL (172 points), FFC (164 points), NBP (105 points), and MCB (77 points). Meanwhile, negative contributions came from PPL (117 points), OGDC (115 points), HBL (84 points), SYS (77 points), and LUCK (76 points).
Foreign buying persisted during the week, amounting to USD 2.0 million compared to a net buy of USD 2.7 million the previous week. Major buying activities were observed in Commercial Banks (USD 0.8 million) and Exploration & Production (USD 0.6 million). On the local front, selling was reported by Companies (USD 9.0 million) followed by Banks/DFIs (USD 5.0 million). Average volumes stood at 295 million shares (down by 13 percent WoW) while the average value traded settled at USD 40 million (down 4 percent WoW).
The positive outcome of the IMF talks, coupled with favorable economic indicators, is expected to sustain investor confidence and drive further growth in the Pakistan stock market in the upcoming week.
