Karachi, September 21, 2024 – Pakistan stocks projected to continue its upward momentum next week, beginning on September 23, 2024, driven by favorable economic developments and positive market sentiment.
Analysts at Arif Habib Limited, a leading investment firm, have expressed optimism, attributing the bullish outlook at Pakistan stocks to several key factors, including anticipated financial inflows from the International Monetary Fund (IMF) and encouraging corporate results during the ongoing earnings season.
“We expect the Pakistan stocks to maintain its upward trajectory, capitalizing on the momentum gained by the end of this week,” said the analysts. They emphasized that the anticipated approval of a significant loan package from the IMF under the Extended Fund Facility (EFF) could provide further support to the market. The IMF’s Executive Board is scheduled to meet on September 25, 2024, to discuss the release of a $7 billion tranche, which is expected to provide a strong boost to investor confidence.
The benchmark KSE-100 index of the Pakistan Stock Exchange (PSX) is currently trading at a price-to-earnings ratio (PER) of 4.1x for 2025, significantly lower than its five-year average of 5.9x. This indicates that the market is relatively undervalued, offering attractive investment opportunities. Additionally, the index is providing a healthy dividend yield of approximately 10.5%, compared to its five-year average of 8.2%, making it appealing for income-seeking investors.
Week in Review: Positive Momentum
The KSE-100 index experienced a robust performance this past week, closing at 82,074 points, representing an increase of 2,741 points or 3.5% on a week-on-week basis. This surge was primarily driven by optimism surrounding the impending IMF loan approval, coupled with positive macroeconomic data.
Notably, the U.S. Federal Reserve’s decision to cut interest rates by 50 basis points had a ripple effect across Asian markets, including Pakistan’s stock exchange, spurring increased market participation. Furthermore, Pakistan’s Large Scale Manufacturing Industries (LSMI) reported a 2.4% year-on-year increase in output for July 2024, though there was a slight month-on-month decline of 2.1%.
Additionally, the country recorded a current account surplus of $75 million in August 2024, marking its first surplus after four consecutive months of deficits. This positive development further buoyed market sentiment. On the monetary front, the central bank’s reserves increased by $43 million, reaching $9.5 billion, while the Pakistani rupee appreciated slightly by 0.12%, trading at 277.8 against the U.S. dollar.
Sector Performance
Sector-wise, the market saw positive contributions from a range of industries. The largest gains were made in commercial banks, which added 1,139 points to the index, followed by the exploration and production (E&P) sector (637 points), fertilizer (631 points), cement (161 points), and oil and gas marketing companies (OGMCs) (74 points).
On the flip side, some sectors faced challenges, with the refinery sector losing 30 points, engineering shedding 29 points, and glass and ceramics dropping by 24 points. In terms of individual stocks, notable contributors to the positive performance included MARI (567 points), FFC (324 points), MEBL (304 points), EFERT (287 points), and MCB (278 points). Meanwhile, scrips such as NBP, PPL, DGKC, FFBL, and TGL detracted from the index.
Foreign and Local Investor Activity
Foreign investors continued their selling spree, offloading $23 million worth of shares, compared to $7.5 million in the previous week. The largest foreign selloffs were in the fertilizer ($9.8 million), E&P ($6.1 million), and banking ($2.8 million) sectors.
On the domestic front, mutual funds emerged as the primary buyers, acquiring $15.5 million worth of shares. Individuals followed with purchases totaling $4.4 million, while banks bought $3.3 million worth of equities. Despite the decrease in average trading volumes, which fell by 22.6% to 469 million shares, the average value of traded shares increased by 20.9% to $66 million.
Outlook for Next Week
Looking ahead, market participants will be closely watching the IMF’s decision on the $7 billion EFF loan, which is expected to provide a further boost to investor confidence. The ongoing earnings season will also keep certain stocks in the spotlight, particularly those with strong financial performance. Analysts expect the KSE-100 index to maintain its upward momentum, as positive economic indicators and favorable market conditions continue to support growth.
