Analysts at Arif Habib Limited foresee a continued attraction in Pakistan’s stock market during the week commencing December 18, 2023. Despite a week marked by fluctuations, the benchmark KSE-100 index of the Pakistan Stock Exchange (PSX) is poised to maintain its allure, trading at enticing valuations that may draw in more investors.
The KSE-100 index is currently at a Price-to-Earnings Ratio (PER) of 4.4x for 2024, compared to its 5-year average of 5.9x. Additionally, it offers a dividend yield of approximately 10.1 percent, exceeding its 5-year average of 6.0 percent. These attractive valuation metrics contribute to the optimistic outlook for the coming week.
The previous week witnessed a roller coaster ride in the stock market, with one of the key highlights being the Monetary Policy Committee’s decision to keep the policy rate unchanged, aligning with market expectations. A Treasury Bills (T-bill) auction showed no significant changes in cut-offs across all tenors. Despite positive economic indicators such as a strengthening local currency and the continuation of a Stand-by Arrangement with the IMF, Fitch maintained Pakistan’s Long-Term Foreign-Currency Issuer Default Rating at ‘CCC.’
Among other significant developments, Aramco, the Saudi oil giant, signed a definitive agreement to acquire a 40 percent equity stake in Gas & Oil Pakistan Ltd (GO). Conversely, Large Scale Manufacturing and Industries (LSMI) output experienced a YoY decline of 4.1 percent in October 2023, with a 2.0 percent MoM decrease. The State Bank of Pakistan’s reserves surged by USD 21 million, reaching a total of USD 7 billion. The Pakistani Rupee closed the week at 283.26 against the US Dollar, appreciating by 0.61 percent week-on-week.
Closing the week at 66,130 points, the market saw a marginal decline of 94 points, equivalent to -0.14 percent week-on-week. Sector-wise, negative contributions came from Commercial Banks, Food & Personal Care, Miscellaneous, Textile Composite, and Leather & Tanneries. On the positive side, Oil & Gas Exploration Companies and Fertilizer sectors made significant contributions.
Scrip-wise, negative contributors included MEBL, UBL, BAHL, HUBC, and HBL, while positive contributions were made by PPL, FFC, PTC, SNGP, and BOP.
Foreigner buying remained robust during the week, totaling USD 13.1 million, compared to a net buy of USD 9.6 million the previous week. Notable buying activities were observed in All Other Sectors and the Cement sector. On the local front, selling was reported by Insurance Companies (USD 5.65 million) followed by Broker Proprietary (USD 3.71 million).
Average trading volumes rose by 22 percent week-on-week, reaching 1,253 million shares, while the average value traded settled at USD 107 million, marking a 10 percent decline week-on-week.
As the market looks forward to the upcoming week, the sustained positive momentum, coupled with attractive valuations, may continue to draw both local and foreign investors to the Pakistani stock market.
