Karachi, October 5, 2024 – The Pakistan stock market is expected to continue its upward rally in the coming week, starting October 7, 2024, owing to prevailing positive sentiments and favorable market conditions. According to analysts at Arif Habib Limited, the market is projected to sustain its momentum as investors anticipate strong financial results with the start of a new earnings season.
Several key scrips are expected to attract investor attention, particularly those poised to deliver robust financial results. The current valuation metrics for the PSX indicate a positive outlook, with the benchmark KSE-100 index trading at a price-to-earnings ratio (PER) of 4.3x for 2025, significantly lower than its 5-year average of 5.9x. Furthermore, the market is offering an attractive dividend yield of approximately 10.3%, which is higher than its 5-year average of 8.2%.
Record-Breaking Performance
The stock market recently achieved an all-time high, closing at 83,532 points at the end of the week on October 4, 2024. This surge was bolstered by a series of favorable economic developments. These include:
1. Inflation Decline: Inflation hit a 44-month low, falling to 6.9% in September 2024, which has been a major catalyst in boosting market sentiment.
2. Treasury Bill Buyback: The government initiated a buyback of treasury bills worth PKR 351 billion at significantly reduced rates, providing liquidity to the financial markets.
3. Economic Growth: The country’s GDP recorded a 2.52% growth in FY24, driven largely by an uptick in the agriculture sector.
4. Trade and Export Growth: Pakistan’s trade deficit narrowed to USD 5.4 billion in the first quarter of FY25, while exports reached their sixth-highest quarterly figure at USD 7.9 billion.
5. T-Bill Auction Success: The State Bank of Pakistan (SBP) raised PKR 244 billion through a successful treasury bill auction, with 6-month and 12-month yields falling to their lowest levels since April 2022, at 14.4% and 13.7%, respectively.
6. Foreign Exchange Reserves: SBP reserves surged to USD 10.7 billion, the highest since April 2022, while the Pakistani Rupee appreciated against the US Dollar, closing at PKR 277.5.
Sector and Scrip Contributions
The sectors contributing to the market’s positive performance include Fertilizer, Oil & Gas Exploration, Commercial Banks, Cement, and Oil & Gas Marketing Companies. Fertilizer alone contributed 716 points to the overall index, while Oil & Gas Exploration added 585 points. On the other hand, the Engineering, Glass & Ceramics, Pharmaceuticals, Technology & Communication, and Chemical sectors registered negative contributions, though the impact was relatively minor.
Key scrip-wise positive contributors included Fauji Fertilizer Company (FFC) with 512 points, Pakistan Petroleum Limited (PPL) with 222 points, Oil and Gas Development Company (OGDC) with 212 points, United Bank Limited (UBL) with 108 points, and Pakistan Oilfields Limited (POL) with 98 points. Conversely, the leading negative contributors were TRG Pakistan Limited, International Industries Limited (INIL), Kot Addu Power Company (KAPCO), Engro Polymer & Chemicals (EPCL), and International Steels Limited (ISL).
Foreign Selling and Local Buying
Despite the rally, foreign investors remained net sellers, offloading USD 26.1 million worth of equities this week, up from a net sell of USD 10.5 million the previous week. The highest selling activity was seen in the Exploration and Production (E&P) sector (USD 7.2 million), followed by Fertilizer (USD 6.2 million). On the local front, mutual funds were the biggest buyers, reporting purchases worth USD 26.1 million, followed by other organizations with USD 8.0 million in buying.
The average trading volumes for the week stood at 344 million shares, down by 12.1% from the previous week, while the average value traded settled at USD 60 million, a slight decline of 1.3% week-on-week.
With favorable economic conditions and the commencement of the earnings season, analysts remain optimistic that the Pakistan stock market will maintain its rally in the coming week, supported by robust fundamentals and positive market sentiment.