Pakistan Stock Market Poised for Continued Rally Next Week

Pakistan Stock Market Poised for Continued Rally Next Week

Karachi, Pakistan – June 23, 2024 – The positive momentum gripping the Pakistan stock market is expected to carry over into next week, starting June 24th, 2024. Analysts at Arif Habib Limited predict a continuation of the bullish trend, fueled by a combination of factors.

Positive Sentiment Driven by Multiple Forces

Several key drivers are seen as underpinning the optimistic outlook for the coming week at the Pakistan stock market. Developments surrounding the International Monetary Fund (IMF) program are anticipated to further bolster investor confidence. Additionally, attractive valuations across various sectors are likely to entice investment activity.

Valuations Offer Alluring Entry Point

The current Price-to- Earnings Ratio (PER) of the benchmark KSE-100 index sits at a tempting 4.4x for 2024, well below the 5-year average of 6.1x. This, coupled with a dividend yield of approximately 10.3%, compared to the historical average of 7.3%, presents an attractive opportunity for investors seeking both growth and income potential.

Recent Performance Highlights Market Strength

The past two trading sessions witnessed the Pakistan stock market maintain its upward trajectory, surging from 76,707 points to a record-breaking closing of 78,810 points. Investor optimism is fueled by expectations of a new IMF program, declining inflation, favorable interest rate adjustments, and a shift in investment focus from fixed-income instruments to equities.

Market Milestones Reached

The Pakistan stock market also reached a historic milestone this week, with the market capitalization surpassing PKR 10.55 trillion. This eclipses the previous record of PKR 10.45 trillion set in May 2017. Furthermore, the State Bank of Pakistan’s foreign exchange reserves rose by $31 million to a current total of $9.1 billion. The Pakistani Rupee also displayed stability against the US dollar, hovering around PKR 278.5.

Sectoral Performance Breakdown

The week’s Pakistan stock market performance was characterized by strong contributions from several sectors. Commercial banks led the surge, adding 1,486 points, followed by Power Generation & Distribution (409 points), Fertilizer (151 points), Chemical (76 points), and Textile (55 points). Sectors experiencing minor declines included Cement (89 points), Technology & Communication (67 points), and OMCs (41 points).

Scrip-Wise Performance Highlights

Looking at individual stocks, positive contributions came from UBL (403 points), HUBC (397 points), MCB (278 points), HBL (248 points), and BAHL (193 points). Conversely, LUCK (-81 points), SYS (-66 points), MARI (-46 points), ENGRO (-31 points), and PSO (-30 points) were among the stocks that experienced price declines.

Foreign and Local Investor Activity

Foreign investors displayed a net buying position during the week, with an inflow of $0.6 million, marking a significant improvement from the previous week’s net selling of $5.8 million. The primary focus of foreign buying was in Commercial Banks (+$2.5 million) and the Power sector (+$0.8 million). On the domestic front, selling activity was observed from Mutual Funds (-$10.0 million) and Insurance companies (-$1.3 million). Average trading volumes rose slightly by 2.8% week-on-week to 462 million shares, while the average value traded increased by 21.8% to $74 million.

The positive sentiment permeating the Pakistan Stock Exchange is expected to persist next week. Investors will be closely monitoring developments surrounding the IMF program and other key economic factors as they make investment decisions.