Karachi, April 27, 2024 – The Pakistan Stock Exchange (PSX) is set to potentially reach new highs in the upcoming week starting April 29, 2024, buoyed by favorable economic indicators and the anticipation of pivotal policy decisions.
Market analysts, including those at Arif Habib Limited, predict a strong upward trajectory driven by several key factors that could enhance investor sentiment and boost Pakistan stock market performance.
Anticipation of Monetary Policy Decisions
A critical event scheduled for next week is the Monetary Policy Committee (MPC) meeting. Analysts widely speculate that a potential rate cut could further invigorate the market, propelling the benchmark KSE-100 index beyond its current levels. The market’s optimism is rooted in recent economic performances and the expected supportive fiscal measures from the government.
Impact of International Monetary Fund (IMF) Developments
The PSX is also reacting positively to developments concerning Pakistan’s ongoing negotiations with the IMF. A scheduled executive board meeting of the IMF next week is expected to review a new program for Pakistan, which market participants hope will stabilize economic forecasts and reinforce investor confidence in the country’s financial markets.
Earnings Season and Market Valuation
The ongoing earnings season has been a boon for the PSX, with several companies expected to post robust results. The KSE-100 index is currently trading at a Price to Earnings Ratio (PER) of 4.7x for 2024, which is below the 5-year average of 5.6x, but offers a relatively high dividend yield of approximately 9.6 percent compared to the 5-year average of 7.6 percent. This valuation disparity highlights the market’s growth potential and is a key attractor for both domestic and international investors.
Record-Setting Economic Indicators
Adding to the positive outlook, Pakistan recently posted its highest monthly current account surplus in nine years at USD 619 million. Furthermore, foreign direct investment in the country has reached its peak since June 2022, totaling USD 258 million. The Pakistani Rupee closed the week at 278.39 against the US dollar, reflecting stable forex market conditions despite a slight depreciation.
Sector and Scrip Performances
Significant positive contributions to the index came from key sectors such as Fertilizers, Cement, Banks, Exploration & Production (E&P), and Power. Leading the gains were prominent companies such as Engro Fertilizers, United Bank Limited, Lucky Cement, Mari Petroleum, and Hub Power Company. However, sectors such as Tobacco, Miscellaneous, Oil Marketing Companies (OMCs), Refineries, and Chemicals saw declines.
Investment Trends
Foreign investment in the PSX continued, with net buying reaching USD 3.0 million this week, although slightly lower compared to USD 33.9 million the previous week. The major buying activity was observed in E&Ps and commercial banks. On the local front, there was noticeable selling by Insurance companies and Non-Banking Financial Companies (NBFCs). Trading volumes for the week surged by 32 percent week-over-week, with average volumes at 650 million shares, while the average value traded increased by 22 percent to USD 94 million.
Looking Ahead
With the KSE-100 index closing the week at an all-time high of 72,743 points, up by 2.58 percent, the market landscape appears robust. As investors and analysts await the outcomes of the MPC meeting and the IMF’s decisions, the general consensus remains bullish. The coming week could prove pivotal in either reinforcing the current positive momentum or adjusting the course depending on the economic policies and international economic engagements of Pakistan. The PSX’s resilience and potential growth are clear indicators of its emerging market status, attracting keen interest from global investors looking for high-yield opportunities in developing markets.
