Pakistan Stock Market Sentiments Depend on IMF Talks

Pakistan Stock Market Sentiments Depend on IMF Talks

Karachi, July 6, 2024 – The sentiments at the Pakistan stock market will hinge on the developments in the upcoming negotiations for a new loan program with the International Monetary Fund (IMF) next week.

Analysts at Arif Habib Limited stated that stock market participants will be keenly observing the new IMF Extended Fund Facility (EFF) program, with any positive outcomes expected to sustain the current bullish momentum.

Stocks are currently trading at attractive valuations, potentially drawing in a larger number of investors seeking promising opportunities. The benchmark KSE-100 index of the Pakistan Stock Exchange (PSX) is trading at a price-to-earnings ratio (PER) of 4.2x for 2025, compared to its 5-year average of 5.9x, and offering a dividend yield of approximately 10.0% against its 5-year average of around 8.3%.

In the outgoing week, which marked the commencement of the new fiscal year, the market exhibited bullish momentum and closed above the 80,000 points level for the first time. On the economic front, the Consumer Price Index (CPI) for June 2024 stood at 12.6%, bringing the fiscal year 2024 average inflation to 23.4%. Additionally, the reserves of the State Bank of Pakistan (SBP) reached a 2-year high of USD 9.4 billion. Pakistan’s trade deficit for FY24 decreased by 12.3% year-on-year to USD 24.1 billion.

The central government’s debt as of May 2024 increased by 2.6% month-on-month to PKR 67.8 trillion. The Pakistani Rupee depreciated slightly by PKR 0.03, or 0.01% week-on-week, to 278.38 against the US dollar. The market closed at 80,213 points, up by 1,768 points or 2.3% week-on-week.

Sector-wise, positive contributions came from commercial banks (1,031 points), oil and gas exploration companies (175 points), fertilizer (158 points), oil and gas marketing companies (116 points), and cement (78 points). Conversely, the sectors contributing negatively were automobiles (39 points), chemicals (26 points), miscellaneous (25 points), textile composite (15 points), and tobacco (11 points). Key scrip-wise positive contributors included HBL (280 points), NBP (158 points), POL (132 points), PPL (110 points), and BAHL (104 points). Negative contributions came from OGDC (50 points), ENGRO (42 points), THALL (39 points), IBFL (20 points), and PSEL (19 points).

Foreign buying continued during the week, totaling USD 7.7 million compared to a net buy of USD 2.5 million the previous week. Significant buying was observed in the “All Other Sectors” category (USD 5.4 million) and commercial banks (USD 2.2 million). On the local front, selling was reported by mutual funds (USD 13.6 million) and companies (USD 4.6 million). Average trading volumes reached 440 million shares, an increase of 23.8% week-on-week, while the average value traded settled at USD 66 million, up 31.3% week-on-week.

As Pakistan approaches the critical IMF talks, market participants are cautiously optimistic. Any favorable outcomes from these discussions are expected to further bolster investor confidence and sustain the positive market trajectory.