Karachi, July 20, 2024 – The Pakistan stock market is expected to exhibit positive sentiments next week, starting July 22, 2024, according to analysts at Arif Habib Limited. The analysts anticipate buoyant market behavior in anticipation of the International Monetary Fund (IMF) Executive Board’s approval and the subsequent disbursement of the first tranche of the new program.
“We expect the Pakistan stock market to stay positive, anticipating the IMF Executive Board’s approval and the disbursement of the first tranche of the new program,” the analysts said. Additionally, the beginning of the results season next week will be closely watched by the market participants.
The benchmark KSE-100 index is currently trading at a price-to-earnings ratio (PER) of 4.2x for 2025, which is below its five-year average of 5.9x, offering a dividend yield of 9.9% compared to its five-year average of 8.1%. This indicates potential value for investors.
During the three-day trading week, the stock market demonstrated positive momentum, spurred by the IMF and Pakistan reaching a staff-level agreement for a new 37-month Extended Fund Facility (EFF) amounting to USD 7 billion. This development propelled the Pakistan stock market to an all-time high of 81,839 points on Thursday. However, political turbulence erased most of the gains, resulting in the index shedding 1,722 points on the last trading day.
On the economic front, there were several positive indicators. The current account deficit narrowed by 79% to USD 0.7 billion in FY24, marking the lowest level in the past 13 years. Additionally, the Large-Scale Manufacturing Index (LSMI) output witnessed a 7% year-on-year growth in May 2024. The State Bank of Pakistan’s (SBP) exchange reserves inched up by USD 19 million week-on-week to USD 9.4 billion. Furthermore, the Pakistani Rupee (PKR) appreciated against the US Dollar by PKR 0.27 (0.1%) to reach 278.13. The market closed at 80,118 points, gaining 174 points (0.22%) week-on-week.
Sector-wise, positive contributions came from Exploration & Production (207 points), Technology & Communication (103 points), Fertilizer (83 points), Cement (83 points), and Automobile Parts (57 points). However, sectors that contributed negatively included Power (249 points), Tobacco (51 points), Engineering (47 points), Pharmaceuticals (45 points), and Banks (41 points). On a scrip-wise basis, positive contributors were Pakistan Oilfields Limited (129 points), Engro Corporation (126 points), MCB Bank (115 points), United Bank Limited (79 points), and Lucky Cement (68 points). Conversely, negative contributions came from Hub Power Company (155 points), Habib Bank Limited (91 points), Fauji Fertilizer Company (73 points), National Bank of Pakistan (63 points), and Pakistan GasPort (61 points).
Foreign investor buying continued during the week, totaling USD 9.3 million compared to a net buy of USD 4.0 million last week. Major buying was observed in the “All Other Sectors” category (USD 5.2 million) and Technology (USD 2.0 million). On the local front, selling was reported by Insurance companies (USD 7.7 million) and other companies (USD 4.4 million). Average trading volumes reached 464 million shares, up 5.6% week-on-week, while the average value traded settled at USD 96 million, reflecting a 29.2% increase week-on-week.
With the anticipation of the IMF program’s approval and positive economic indicators, the Pakistan stock market is poised to maintain an optimistic outlook in the coming week.