Karachi, March 16, 2024 – The Pakistan stocks poised for a consequential response in the upcoming week, largely influenced by the outcomes of the policy rate announcement and ongoing discussions with the International Monetary Fund (IMF).
Analysts at Arif Habib Limited have underscored the significance of the ongoing negotiations with the IMF, which are primarily focused on securing the second tranche of the SBA (Stand-By Arrangement). Upon successful conclusion, Pakistan stands to receive the third tranche of the SBA, amounting to USD 1.1 billion. This development holds substantial weight in shaping market sentiment.
Furthermore, attention is directed towards the resolution of the energy circular debt, a pressing concern highlighted by the energy minister. Efforts to expedite the resolution process are underway, and any favorable progress in this domain is anticipated to uplift market sentiment.
In addition to these factors, the upcoming Monetary Policy Committee (MPC) meeting scheduled for March 18, 2024, adds another layer of anticipation. Analysts are projecting a potential rate cut of 100 basis points, a move that could potentially stimulate positive market sentiment.
Presently, the benchmark KSE-100 index of the Pakistan Stock Exchange (PSX) is trading at a Price-to-Earnings Ratio (PER) of 4.2x (2024), compared to its 5-year average of 5.9x. This offers a dividend yield of approximately 10.5 percent, contrasting with its 5-year average of around 7.7 percent.
The past week witnessed the stock market grappling with various pressures. Divided opinions regarding the upcoming MPC meeting, alongside the ongoing negotiations with the IMF, contributed to market volatility. However, the recent formation of the cabinet and the appointment of Muhammad Aurangzeb as finance minister have provided some resolution to lingering uncertainties.
On the economic front, the Government of Pakistan successfully raised PKR 93 billion against a target of PKR 50 billion through Ijarah Sukuk. Moreover, Broad Money (M2) witnessed an increase of PKR 496 billion, reaching PKR 32.7 trillion as of March 1, 2024. Additionally, State Bank of Pakistan (SBP) reserves surged by USD 17 million WoW, reaching USD 7.9 billion. The Pakistani Rupee (PKR) appreciated slightly, closing at 278.74 against the USD.
Sector-wise negative contributions were led by Fertilizer, Oil & Gas Exploration, Commercial Banks, Oil & Gas Marketing Companies, and Power. Conversely, Automobile Parts, Paper & Board, and Chemicals sectors made positive contributions.
Foreign buying continued during the week, amounting to USD 2.7 million compared to a net buy of USD 6.3 million in the preceding week. Major buying activities were observed in Commercial Banks and Cement sectors. Locally, selling was reported by Companies and Broker Proprietary.
Amidst these developments, other major news items include discussions on the privatization of Pakistan International Airlines Corporation Limited (PIACL), setting timelines for energy projects, a likely status quo on petroleum product prices, and a reported decline of 14 percent year-on-year in Pakistan’s oil reserves amidst production challenges.
As the market gears up for the forthcoming week, investors remain attentive to the unfolding policy and economic landscape, cognizant of the potential implications on market dynamics and investment strategies.
