Karachi, February 10, 2024 – Investors at Pakistan stocks are closely monitoring the formation of a new government and its potential impact on the capital market during next week.
Analysts at Arif Habib Limited have indicated that the upcoming week holds the promise of clarity on the election result front, with the emergence of election winners and the subsequent formation of the government. Market participants are on high alert, closely watching these developments for their potential impact on the market. Additionally, against the backdrop of the ongoing result season, specific stocks are expected to garner attention due to anticipated strong financial performances.
Stocks are currently trading at attractive levels, creating a favorable environment that may further entice investors. The benchmark KSE-100 index of the Pakistan Stock Exchange (PSX) is presently trading at a Price-to-Earnings Ratio (PER) of 4.3x for the year 2024, compared to its 5-year average of 5.9x. Furthermore, it offers a dividend yield of approximately 10.4 percent, significantly higher than its 5-year average of approximately 6.0 percent.
Over the course of the past three days, the local market exhibited a range-bound behavior, with market sentiment predominantly influenced by election-related developments. On the last day of the week, signs of pressure emerged due to delays in the announcement of polling results, leading to increased uncertainty among investors.
During the week, a T-bill auction took place on Tuesday, with the State Bank of Pakistan (SBP) raising PKR 64 billion against the set target of PKR 480 billion. Additionally, SBP’s reserves reduced by USD 172 million, reaching USD 8.0 billion. The Pakistani Rupee closed at 279.28 against the US Dollar, strengthening by PKR 0.13, or 0.05 percent, week on week. The market closed at 62,944 points, experiencing a decline of 59 points, or -0.09 percent, week on week.
Negative contributions at the sector level were observed in Fertilizer (60 points), Technology & Communication (45 points), Food & Personal Care Products (24 points), Oil & Gas Marketing Companies (15 points), and Textile Composite (14 points). Conversely, positive sector-wise contributions came from Power Generation & Distribution (54 points), Miscellaneous (40 points), Commercial Banks (21 points), and Oil & Gas Exploration Companies (15 points).
Scrip-wise, negative contributors included ENGRO (55 points), OGDC (50 points), SYS (31 points), HBL (28 points), and APL (20 points). Meanwhile, positive contributions were made by HUBC (62 points), PSEL (48 points), PPL (45 points), BAHL (40 points), and LUCK (22 points).
Foreign buying activity increased during the week, amounting to USD 5.7 million, compared to a net sell of USD 9.7 million the previous week. Notable foreign buying was witnessed in Exploration & Production (USD 4.9 million) and Commercial Banks (USD 1.2 million). On the local front, selling was reported by Mutual Funds (USD 5.5 million), followed by Other Organizations (USD 1.2 million). Average volumes reached 306 million shares, representing a 2.3 percent week-on-week decrease, while the average value traded settled at USD 50 million, marking a 21.7 percent week-on-week increase.
As the political landscape unfolds, investors will be closely watching the market dynamics, making strategic decisions based on the emerging government and its policies, while keeping an eye on the financial performance of specific stocks during this result season.
