Karachi, November 9, 2024 – Pakistan stocks are expected to maintain their record-breaking rally next week, with analysts forecasting continued positive momentum. The main driver of this optimism is the attractive valuations of certain scrips, which are likely to keep drawing investor interest in the coming week.
According to analysts at Arif Habib Limited, the market is positioned to sustain its upward trend, buoyed by scrips trading at appealing prices and offering high dividend yields. The benchmark KSE-100 index, which recently surged to an all-time high of 93,292 points, is currently trading at a Price-Earnings Ratio (PER) of 4.7x for 2025, which is below its five-year average of 5.9x. Additionally, the index provides a dividend yield of approximately 9.3%, which is also above the historical average of 8.0%. These factors are expected to keep investor sentiment positive and foster continued growth in the coming weeks.
This week, the market exhibited a stellar performance, driven by a series of positive economic indicators and favorable policy changes. The State Bank of Pakistan (SBP) cut its policy rate by 250 basis points, lowering the rate to 15%, which further fueled investor confidence. In the latest quarterly review, Pakistan’s weight in the MSCI Emerging Markets index increased to 4.4%, making it the second most liquid market in the MSCI Frontier Markets (FM) index. These developments have strengthened the outlook for Pakistan’s equity market.
Furthermore, the Government of Pakistan raised PKR 339 billion through Ijarah Sukuk, with yields on Fixed Rate Instruments (FRR) declining by 43-104 basis points. On the economic front, remittances for October 2024 showed a significant 24% year-on-year increase, reaching USD 3.1 billion. The country’s foreign exchange reserves rose by USD 18 million week-on-week, reaching USD 11.2 billion, marking the highest level since April 2022. The Pakistani Rupee (PKR) also remained stable, closing the week at 277.95 against the US Dollar.
Sector-wise, several key industries contributed positively to the market’s performance. The Fertilizer sector contributed 505 points, followed by Cement with 404 points, Power Generation & Distribution with 376 points, Oil & Gas Exploration with 320 points, and Automobile Assemblers with 288 points. On the downside, sectors such as Commercial Banks, Leather & Tanneries, and Tobacco showed negative contributions, losing 337, 29, and 9 points, respectively.
In terms of individual stocks, key contributors included Oil & Gas Development Company (OGDC) with 311 points, Hub Power Company (HUBC) with 297 points, Lucky Cement (LUCK) with 236 points, Engro Corporation (ENGRO) with 236 points, and Systems Limited (SYS) with 138 points. On the other hand, the stocks of United Bank Limited (UBL), Habib Bank Limited (HBL), MCB Bank (MCB), Bank Alfalah (BAHL), and Mehran Sugar (MEHT) detracted from the index, contributing a combined loss of 391 points.
Despite the overall positive sentiment, foreign investors turned net sellers, with outflows amounting to USD 4.65 million this week, compared to net buying of USD 1.97 million the previous week. The major selling activity occurred across multiple sectors, including Fertilizer, where USD 2.2 million worth of stocks were offloaded. However, local buying remained strong, with Mutual Funds being the biggest buyers, investing USD 22.0 million, followed by Other Organizations with USD 3.2 million.
The market saw an increase in trading activity, with average volumes rising 31.3% week-on-week to 735 million shares. The average value traded also rose by 12.3% to USD 107 million. As Pakistan stocks continue their rally, investors remain hopeful that this positive momentum will be sustained in the weeks ahead, driven by a combination of favorable valuations and positive economic data.
