Karachi, October 12, 2024 – Pakistan stocks are projected to maintain their positive trajectory next week, driven by anticipated strong corporate results, according to analysts from Arif Habib Limited. With the result season starting next week, several key scrips are expected to be in the spotlight, fueled by predictions of robust financial outcomes.
The benchmark KSE-100 index of the Pakistan Stock Exchange (PSX) is currently trading at a Price-to-Earnings Ratio (PER) of 4.4x for 2025, lower than its five-year average of 5.9x. The market is also offering an impressive dividend yield of approximately 10%, compared to the five-year average of 8.2%. This valuation suggests that Pakistan stocks are currently undervalued, presenting an attractive opportunity for investors looking for strong returns, particularly in light of the upcoming corporate earnings season.
Strong Performance This Week
Pakistan stocks had a remarkable performance this week, with the KSE-100 index reaching an all-time high of 85,669 points on Wednesday. Scrips such as Oil and Gas Development Company Limited (OGDC) and Pakistan Petroleum Limited (PPL) were particularly strong, benefiting from their recently published financial accounts, which showed nearly 100% cash sales in the fourth quarter of the fiscal year 2024 (4QFY24). The halted accumulation of circular debt further bolstered investor confidence in these companies.
Optimism around potential foreign investment also boosted Pakistan stocks this week, particularly after a visit from a Saudi delegation, which raised hopes for significant investment deals in the energy and infrastructure sectors.
Economic Indicators Supporting Market Optimism
Several macroeconomic factors also contributed to the positive sentiment in Pakistan stocks. The country achieved a record quarterly remittance inflow of USD 8.8 billion in the first quarter of fiscal year 2025 (1QFY25), marking a 39% year-on-year increase. This surge in remittances provides much-needed support to Pakistan’s foreign exchange reserves and overall economic stability.
Additionally, the government executed a buyback of treasury bills amounting to PKR 475 billion, while net investments through the Roshan Digital Account (RDA) reached USD 1.532 billion. Auto sales also experienced a significant boost, with 27,600 units sold in 1QFY25, reflecting a 31% year-on-year growth.
On the reserves front, the State Bank of Pakistan (SBP) reported an increase, with reserves reaching USD 10.8 billion, the highest level since April 2022. However, the Pakistani rupee (PKR) depreciated slightly against the US dollar, closing at 277.5, a marginal 0.12% decline week-on-week.
Sector-wise Contributions
This week, the KSE-100 index closed at 85,483 points, representing an increase of 1,951 points, or 2.34% week-on-week. Sector-wise, the top contributors to this growth were Commercial Banks (1,015 points), Exploration & Production (628 points), Fertilizer (328 points), Oil Marketing Companies (288 points), and Pharmaceuticals (120 points).
On the other hand, sectors that contributed negatively included Power (-570 points), Cement (-58 points), Automobile Parts & Accessories (-15 points), Textile Composite (-14 points), and Insurance (-11 points).
Foreign and Local Market Participation
Foreign investors continued to sell Pakistan stocks, with net foreign outflows amounting to USD 22.6 million this week, compared to USD 26.1 million in the previous week. The heaviest foreign selling was in the Foods and Personal Care Products sector (USD 18 million), followed by the Power sector (USD 7.7 million).
Meanwhile, local buyers remained active, with mutual funds leading the charge, buying USD 18.9 million worth of shares, followed by the insurance sector, which purchased USD 10.7 million. The average daily trading volume surged by 52.2% to 523 million shares, while the average value of traded shares jumped by 78%, settling at USD 107 million.
In conclusion, Pakistan stocks are expected to maintain their upward momentum as the market looks forward to strong corporate earnings. Positive economic indicators, combined with local buying support and attractive valuations, are likely to keep the market buoyant in the coming weeks.