Karachi, July 22, 2023 – Analysts at Arif Habib Limited have projected a positive outlook for the Pakistan stock market during the upcoming week. Despite a shaky start, market participants are optimistic about the market’s performance in the coming days, driven by several favorable factors.
With the result season kicking off, specific sectors and scrips are expected to garner significant attention, keeping the market sentiment upbeat. Additionally, the government’s pursuit of new financing opportunities from bilateral and multilateral sources is seen as a potential booster for the market.
READ MORE: Pakistan Stocks Soar 522 Points; Banking Sector Leads the Charge
As of now, the benchmark KSE-100 index of the Pakistan Stock Exchange (PSX) is trading at a Price-to-Earnings Ratio (PER) of 3.7x (2024), compared to its 5-year average of 5.9x, offering an attractive dividend yield of approximately 10.7 percent compared to its 5-year average of ~6.6 percent.
The week began with a negative note as investors engaged in profit-taking activities. The release of the IMF country report further divided market sentiments regarding the upcoming monetary policies, specifically pertaining to interest rates.
READ MORE: Pakistan Equities Experience Bullish Trading, KSE-100 Index Gains 303 Points
However, the market sentiment took a positive turn mid-week as Pakistan announced its fourth consecutive monthly Current Account Surplus, amounting to USD 334 million in June 2023. This news was well-received by investors and contributed to a bullish trend in the market.
Furthermore, investors’ confidence received a significant boost with the announcement of a USD 600 million rollover from China. The State Bank of Pakistan’s (SBP) reserves also witnessed a substantial increase, reaching USD 8.7 billion (up by USD 4.2 billion WoW) as of July 14, 2023, a level not seen since October 2022. This was primarily attributed to significant inflows from the International Monetary Fund (IMF), Saudi Arabia (KSA), and the United Arab Emirates (UAE).
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The positive momentum continued on Friday, with the market crossing the 46,000 points level during intraday, a level previously observed on April 25, 2022.
However, it was not all smooth sailing during the week. The Pakistani Rupee (PKR) experienced depreciation against the USD, closing at PKR 286.81, reflecting a loss of PKR 9.22 or approximately 3.21 percent WoW.
The overall market performance closed at 45,921 points, soaring by 853 points (an increase of 1.9 percent) WoW. The week saw significant positive contributions from sectors such as Banks (768 points), E&Ps (95 points), Food & Personal Care (24 points), and OMCs (22 points). However, the Pharma (33 points), Fertilizer (28 points), and Miscellaneous (19 points) sectors made negative contributions.
READ MORE: KSE-100 Index Maintains Level of 45,000 Amidst Volatility
Scrip-wise, notable positive contributors were UBL (308 points), MCB (126 points), MEBL (85 points), BAHL (80 points), and POL (69 points). On the other hand, scrip-wise negative contributions were observed from ENGRO (31 points), SYS (15 points), CHCC (15 points), PSEL (14 points), and HINOON (12 points).
Foreign investors continued to show interest in the Pakistan stock market, with a net buying amounting to USD 5.4 million, compared to a net buy of USD 1.0 million the previous week. Major buying was witnessed in the Banks (USD 2.2 million) and E&P (USD 1.2 million) sectors. Conversely, local selling was reported by Mutual Funds (USD 5.8 million) followed by Other Organizations (USD 1.9 million).
The average trading volume for the week reached 357 million shares, down by 19 percent WoW, while the average value traded settled at USD 32 million, reflecting a decline of 28 percent WoW.
In conclusion, the Pakistan stock market is poised to maintain its positive trajectory in the upcoming week, supported by favorable macroeconomic factors and renewed investor confidence. Nevertheless, market participants will closely monitor developments in the international and domestic economic landscape to make informed investment decisions.
