Karachi, August 19, 2023 – Analysts are forecasting a week of stability for Pakistan equities following the establishment of a caretaker cabinet, offering hope for investors in the wake of recent political and economic turbulence.
Experts at Arif Habib Limited suggest that the recent formation of a caretaker cabinet and the resulting clarity in the interim governance structure have set the stage for a positive week starting August 21, 2023 in the stock market. There is also growing anticipation of strong financial performances in specific sectors and stocks, which could boost overall market momentum.
As the new week approaches, the benchmark KSE-100 index of the Pakistan Stock Exchange (PSX) is trading at a price-to-earnings ratio (PER) of 3.8x (2024), compared to its 5-year average of 5.8x. Additionally, it offers a dividend yield of approximately 10.3 percent, a significant increase from its 5-year average of around 6.8 percent.
The previous week saw the Pakistani stock market remaining range-bound due to various developments on both the political and economic fronts. Notably, there was a significant transition in governance as an interim caretaker setup assumed control. Market sentiment was also negatively impacted by a substantial increase in petrol and diesel prices, with petrol rising by PKR 17.5 and diesel by PKR 20.00.
On the economic front, the fiscal year deficit was recorded at PKR 6,521 billion, which represents 7.7 percent of the GDP. As of June 2023, the central government debt increased to PKR 60.8 trillion, marking a 3.3 percent month-on-month rise. Meanwhile, the State Bank of Pakistan (SBP) reported an increase of USD 12 million in reserves, reaching a total of USD 8.1 billion. However, the Pakistani Rupee (PKR) experienced depreciation against the US Dollar, closing the week at PKR 295.78, marking a loss of PKR 7.29 or a 2.46 percent decrease week-on-week.
In summary, the market concluded the week with a close at 48,218 points, reflecting a decline of 206 points or 0.4 percent week-on-week. Negative contributions to sectors came from Commercial Banks (-159 points), Fertilizers (-122 points), Cement (-63 points), Chemicals (-38 points), and E&P (-37 points). Conversely, Technology (+194 points) and Textile Composite (+20 points) were the sectors with positive contributions. Among individual stocks, ENGRO (-118 points), OGDC (-77 points), MCB (-65 points), MEBL (-30 points), and HBL (-22 points) had negative impacts, while SYS (+194 points), PPL (+62 points), NESTLE (+28 points), THALL (+17 points), and ILP (+17 points) made positive contributions.
Foreign investor activity for the week saw net buying at USD 2.38 million compared to a net buy of USD 2.92 million the previous week. Notably, Technology (USD 1.45 million) and E&P (USD 0.72 million) witnessed significant foreign buying. On the local front, selling was primarily reported by banks (USD 3.9 million) followed by funds (USD 1.62 million). Average trading volumes during the week amounted to 232 million shares, marking a decrease of 32.6 percent week-on-week, while the average traded value settled at USD 32 million, representing a 36 percent decrease week-on-week.
