Karachi, July 13, 2024 – Pakistan stock market is anticipated to see a positive response in the upcoming week following the announcement of a staff-level agreement (SLA) between Pakistan and the International Monetary Fund (IMF) for a $7 billion Extended Fund Facility (EFF).
Financial experts and market analysts have expressed optimism about the impact of the IMF SLA on the opening of Pakistan stocks on Monday, July 15, 2024. The agreement is expected to inject confidence into the market, potentially leading to increased buying activity and higher stock prices. However, the market may face challenges such as shortened trading days due to upcoming holidays related to Ashura e Moharram and the recent Supreme Court decision affecting reserved seats.
Arif Habib Limited analysts have noted that the stock market will be open for only three trading days in the upcoming week, which could result in lower overall trading volumes and activity. Despite these challenges, the sentiment remains positive following recent economic developments and the market’s strong performance earlier in the year.
The benchmark KSE-100 index of the Pakistan Stock Exchange (PSX) has shown resilience and is currently trading at a Price-to-Earnings Ratio (PER) of 4.2x for 2025, compared to its five-year average of 5.9x. This lower valuation metric suggests potential undervaluation, making stocks attractive to investors seeking higher dividend yields, which currently stand at approximately 9.9%, above the five-year average of 8.3%.
Earlier this week, the PSX started on a positive note, building on momentum from previous sessions. The market reached its highest-ever level of 80,672 points, touching an intra-day peak of 81,087 points on Tuesday. However, subsequent trading days saw corrections following the unveiling of new IMF conditions, including the abolition of the Pakistan Sovereign Wealth Fund and proposals for a 45% tax on agricultural income.
Economically, Pakistan saw a notable increase in remittances, rising by 44% year-on-year to USD 3.2 billion in June 2024. Additionally, the State Bank of Pakistan (SBP) successfully raised funds through auctions, with yields on Treasury Bills declining. SBP reserves also saw a modest increase to USD 9.4 billion, contributing to stability in the Pakistani Rupee, which remained steady at 278.40 against the US Dollar.
Despite the overall market correction last week, sector-wise performance varied significantly. Negative contributions came primarily from Energy & Petroleum sectors, Commercial Banks, Auto Assemblers, Power, and Oil Marketing Companies (OMCs). Conversely, sectors such as Fertilizers, Food & Personal Care Products, Textile Composites, Technology, and Pharmaceuticals made positive contributions.
Foreign investor interest remained robust, with net buying recorded at USD 4.0 million, albeit lower than the previous week’s USD 7.7 million. Significant foreign buying was observed in Banks and Technology sectors. On the domestic front, selling activities were reported by Individuals and Mutual Funds, influencing market dynamics.
Average trading volumes slightly declined by 0.3% week-on-week to 439 million shares, while the average value traded increased by 13.6% to USD 75 million, indicating active participation despite the holiday-shortened trading week.
Looking ahead, market participants are advised to monitor further developments related to IMF disbursements and economic policies, which could shape investor sentiment and stock market performance in the coming days. The resilience displayed by Pakistan’s stock market amidst global economic uncertainties underscores its potential for growth and stability in the region.