Karachi, October 19, 2024 – The Pakistan Stock Market is poised to continue its bullish momentum into next week, starting October 21, 2024. According to analysts at Arif Habib Limited, investor optimism is likely to persist as the result season progresses, with several stocks set to attract attention due to anticipated strong financial performance.
The benchmark KSE-100 index is currently trading at a price-to-earnings ratio (PER) of 4.3x for 2025, which is notably lower than its five-year average of 5.9x. Additionally, the dividend yield stands at approximately 10.1%, also higher than its five-year average of 8.2%. This makes Pakistan’s equity market an attractive option for investors, particularly those seeking high dividend returns.
Market Recap
This past week saw the KSE-100 index maintain its upward trajectory, reaching a record high of over 86,000 points on Wednesday, driven by investor confidence. The rally was largely fueled by positive sentiment surrounding Pakistan’s participation in the Shanghai Cooperation Organization (SCO) summit.
Despite some economic challenges, including a 24% year-on-year (YoY) increase in the country’s trade deficit to USD 1.8 billion in September 2024, investors remained optimistic. Large-Scale Manufacturing Index (LSMI) output recorded a 2.6% YoY decline in August 2024, but encouragingly, it showed a sequential recovery of 4.7% month-on-month (MoM). This provided further evidence that the economy may be stabilizing despite external pressures.
On the monetary side, Pakistan’s State Bank reserves rose by USD 215 million, bringing the total to USD 11 billion. Additionally, the recent Pakistan Investment Bonds (PIB) auction showed a significant drop in yields across all tenors, with the 2-year PIB yield falling by 74 basis points. The Pakistani Rupee, however, remained under slight pressure, depreciating by 0.02% week-on-week (WoW), closing at PKR 277.6 against the US dollar.
Despite closing the week lower at 85,250 points, marking a slight decline of 233.3 points (-0.27% WoW), the overall market sentiment remained positive.
Sectoral Performance
Sector-wise, negative contributions to the index came from i) Commercial Banks (-293 points), ii) Power Generation (-131 points), iii) Fertilizer (-95 points), iv) Cement (-65 points), and v) Paper & Board (-28 points). These sectors faced pressure due to a combination of lower-than-expected earnings and macroeconomic challenges.
On the other hand, positive contributions came from i) Refinery (+93 points), ii) Tobacco (+82 points), iii) Engineering (+65 points), iv) Pharmaceuticals (+49 points), and v) Automobile assemblers (+34 points). Stocks within these sectors benefited from either robust earnings or favorable macroeconomic trends.
Scrip-wise, the biggest losers included Pakistan Oilfields Limited (POL) (-180 points), Hub Power Company (HUBC) (-142 points), MCB Bank (-134 points), United Bank Limited (UBL) (-119 points), and Engro Corporation (-108 points). In contrast, the key gainers included Mari Petroleum (MARI) (+173 points), Attock Refinery Limited (ATRL) (+101 points), Pakistan Tobacco Company (PAKT) (+82 points), Fauji Fertilizer Company (FFC) (+65 points), and Indus Motor Company (INDU) (+58 points).
Foreign and Local Participation
Foreign investors continued their selling spree this week, offloading shares worth USD 11.6 million. This marks a reduction in net foreign selling compared to the previous week’s USD 22.6 million. The heaviest selling was observed in the “Other Sectors” category, accounting for USD 7.4 million, followed by the Fertilizer sector with USD 1.6 million in net sales.
On the domestic front, local companies emerged as net buyers, purchasing shares worth USD 25.8 million, while mutual funds also increased their positions by buying shares worth USD 7.6 million.
Despite the bullish sentiment, average trading volumes for the week declined by 15.5%, settling at 442 million shares. The average value of traded shares also dropped by 24.5%, with a total value of USD 81 million traded.
Outlook for Next Week
Analysts remain optimistic about the market’s performance in the upcoming week. With the earnings season in full swing and positive developments on the macroeconomic front, the KSE-100 index is expected to maintain its upward trajectory. Additionally, attractive valuations and dividend yields are likely to continue drawing both foreign and local investors to the market.
While external economic challenges persist, the overall sentiment remains positive, and the market is likely to remain buoyant in the short term.