Karachi, November 4, 2023 – Pakistan stocks poised to remain in the green next week, driven by the optimistic outlook for the International Monetary Fund (IMF) review.
Analysts at Arif Habib Limited anticipate that the first review of the IMF’s Stand by Arrangement (SBA) of $700 million is likely to proceed smoothly, sustaining the positive momentum in the coming week. Market participants are keeping a close watch on developments in this regard.
The benchmark KSE-100 index, currently trading at a price-to-earnings ratio (PER) of 4.1x for 2024, as opposed to its five-year average of 5.7x, offers a compelling dividend yield of approximately 11.9 percent, surpassing its five-year average of about 6.7 percent.
The local stock market achieved a remarkable milestone by surpassing its all-time high level of 52,876, last witnessed in May 2017. This ascent began with the State Bank of Pakistan (SBP) maintaining the policy rate at 22 percent, signaling that inflation has reached its peak and is expected to ease in the near future.
Furthermore, the federal cabinet approved the long-awaited increase in gas tariffs, a crucial condition for the ongoing IMF review. In addition to these positive developments, the International Finance Corporation disclosed a substantial $1.5 billion investment strategy for Pakistan. Tax revenue collection during July to October 2023-24 amounted to PKR 2.8 trillion, reflecting a significant year-on-year increase of 28 percent.
Moreover, the trade deficit narrowed by 4.5 percent year-on-year, totaling $2.1 billion in October 2023. Meanwhile, during the past week, the Election Commission of Pakistan (ECP) announced that the general elections will be held on February 8, 2024. Additionally, Pakistan’s foreign exchange reserves increased by $14 million, reaching USD 7.5 billion. By the end of the week, the Pakistani Rupee (PKR) closed at 284.31 against the US dollar, depreciating by 3.74 percent week-on-week. Overall, the market concluded the week at 53,123 points, marking an impressive 4.3 percent weekly increase.
In terms of sector-wise contributions, positive momentum was observed in Commercial Banks (375 points), Power Generation & Distribution (354 points), Fertilizer (265 points), Cement (237 points), and Exploration & Production (E&P) (202 points). Conversely, the Technology & Communication sector experienced a slight dip (7 points), and the Automobile Parts & Accessories sector witnessed a minor decline (3 points). Among the notable scrip-wise gainers were HUBC (343 points), LUCK (147 points), MEBL (122 points), UBL (103 points), and ILP (96 points). In contrast, TRG (58 points), KEL (13 points), BOP (12 points), EPCL (6 points), and FATIMA (4 points) made negative contributions.
Foreign investment exhibited a positive trend this week, with net buying amounting to USD 1.4 million, marking a notable turnaround from the net sell of USD 3.5 million the previous week. Notably, major foreign investment inflows were observed in All Other Sectors (USD 2.0 million) and Exploration & Production (E&P) (USD 0.8 million). On the domestic front, banks and development financial institutions (DFIs) reported net selling of USD 3.0 million, followed by broker proprietary trading with USD 0.7 million in net selling.
The week’s trading activity demonstrated increased participation, with average trading volumes reaching 450.5 million shares, representing a 23 percent week-on-week surge, while the average value traded settled at USD 52.2 million, reflecting a 14 percent week-on-week increase.
Investors and market participants can expect continued positive momentum in Pakistan’s stock market, as it remains closely aligned with the anticipated outcome of the upcoming IMF review and a series of favorable economic developments.
