Karachi, August 10, 2024 – Pakistan stocks is expected to continue its upward momentum in the upcoming week starting August 12, 2024, as per analysts at Arif Habib Limited.
Buoyed by the ongoing corporate results season and the upcoming MSCI review, the market is likely to sustain its positive trajectory.
The analysts highlighted that the MSCI review, scheduled for next week, is anticipated to favor Pakistan, potentially increasing its weight in the Frontier Markets (FM) space. This adjustment could further boost the performance of the benchmark KSE-100 index, adding to the market’s current optimism.
Currently, the KSE-100 index is trading at a Price-to-Earnings Ratio (PER) of 4.1x for 2025, which is significantly lower than its 5-year average of 5.9x. The index is offering an attractive dividend yield of approximately 10.4%, compared to its 5-year average of around 8.2%.
The market faced some initial pressure this week due to investor selling. However, several key economic developments emerged that helped regain momentum. Pakistan secured one-year debt rollover commitments from key lenders, which is a crucial step towards the final approval of the $7 billion loan program. Additionally, the State Bank of Pakistan (SBP) successfully raised PKR 355 billion through a T-bill auction, with yields on 3-month, 6-month, and 12-month T-bills dropping by 52 basis points (bps), 54 bps, and 50 bps, respectively. The KIBOR rates also saw a decrease across all tenors, with reductions ranging from 2 to 40 bps on a day-over-day (DoD) basis.
Moreover, the SBP’s foreign exchange reserves increased by $51 million (0.6% Week-on-Week), reaching $9.2 billion. Despite these positive developments, the Pakistani Rupee (PKR) depreciated slightly against the US Dollar (USD) by PKR 0.05 (0.02%), closing at 278.5. The market ended the week on a positive note, with the KSE-100 index closing at 78,570 points, marking a gain of 344 points (0.4% Week-on-Week).
Sector-wise, positive contributions came from Exploration & Production (E&P) companies, adding 614 points to the index, followed by the Technology sector (84 points), Oil & Gas Marketing Companies (51 points), Food & Personal Care Products (22 points), and Leather & Tanneries (9 points). On the flip side, sectors that negatively impacted the index included Fertilizer (155 points), Power Generation & Distribution (103 points), Refinery (33 points), Cement (32 points), and Chemicals (23 points).
Scrip-wise, MARI Petroleum contributed 447 points, Oil & Gas Development Company (OGDC) added 109 points, United Bank Limited (UBL) 97 points, Meezan Bank Limited (MEBL) 77 points, and Systems Limited (SYS) 62 points. Conversely, major scrip-wise negative contributions came from Fauji Fertilizer Company (FFC), which deducted 236 points, Bank Al-Habib Limited (BAHL) 167 points, Hub Power Company (HUBC) 93 points, Askari Bank Limited (AKBL) 30 points, and Colgate-Palmolive Pakistan (COLG) 26 points.
Foreign investors turned net buyers during the week, with a net inflow of $1.4 million (over four days), in contrast to a net sell of $2.2 million the previous week. The bulk of the buying was observed in the Banking sector ($0.9 million) and the Technology sector ($0.6 million). On the local front, Mutual Funds were the largest sellers, offloading $7.1 million, followed by Companies with $1.6 million.
Average trading volumes for the week increased by 38% Week-on-Week, reaching 493 million shares, while the average value traded rose by 21% to $74 million. With these factors in play, the stock market is poised for continued gains in the upcoming week.
