Karachi, November 11, 2023 – Pakistan stocks are poised to maintain its upward trajectory in the coming week, propelled by anticipation surrounding the first review of the International Monetary Fund (IMF) Standby Arrangement (SBA) for a substantial tranche of $700 million.
Analysts at Arif Habib Limited have indicated that the review, expected to conclude on November 15, 2023, is likely to reinforce the positive momentum observed in recent weeks.
The market’s keen focus on the developments related to the IMF review underscores its significance in shaping investor sentiment. The benchmark KSE-100 index of the Pakistan Stock Exchange (PSX) is presently trading at a Price-to-Earnings Ratio (PER) of 3.9x (2024), a favorable figure compared to its 5-year average of 5.7x. Additionally, it offers an attractive dividend yield of approximately 11.9 percent, surpassing its 5-year average of around 6.7 percent.
This week saw the local bourse achieve a significant milestone by surpassing the 55,506 points mark, driven by a bullish market fueled by optimistic discussions with the IMF. The Oil and Gas Regulatory Authority’s (OGRA) notification of a substantial increase in natural gas prices, effective from November 1, 2023, played a pivotal role in meeting a prerequisite for the ongoing IMF review.
Moreover, the cut-off yields for the 3-year, 5-year, and 10-year Pakistan Investment Bonds (PIBs) recorded notable decreases of 180 basis points, 100 basis points, and 15 basis points, respectively. This indicates a positive outlook on interest rates, suggesting a potential downward trend in the near future.
On the economic front, remittances registered a robust growth of 10 percent Year-on-Year (YoY) and 12 percent Month-on-Month (MoM), totaling 2.46 billion USD. The Pakistani Rupee (PKR) closed the week at 287.03 against the US dollar, reflecting a 2.7 percent depreciation Week-on-Week (WoW). Overall, the market closed at 55,391 points, marking an impressive increase of 4.3 percent WoW.
Positive contributions at the sector level came from Commercial Banks (447 points), Cement (409 points), Fertilizer (362 points), Power Generation and Distribution (345 points), and Exploration and Production (E&P) (147 points). Conversely, the Close-End Mutual Fund (4 points) and Cable and Electrical Goods (2 points) sectors were among the notable detractors.
Scrip-wise, HUBC (282 points), LUCK (159 points), EFERT (151 points), COLG (122 points), and ENGRO (122 points) made significant positive contributions, while UNITY (15 points), ABOT (8 points), PSO (8 points), NRL (6 points), and HGFA (4 points) were notable negative contributors.
Foreign investor sentiment remained positive during the week, with buying totaling USD 1.3 million compared to a net sell of USD 1.4 million the previous week. Noteworthy buying activities were observed in Banks (USD 1.4 million) and Power (USD 1.2 million). On the local front, selling was reported by Banks and Development Financial Institutions (DFIs) (USD 16.3 million) followed by Individuals (USD 7.2 million).
The market’s average volumes witnessed a 21 percent WoW increase, reaching 544 million shares, while the average value traded settled at USD 67.6 million, reflecting a substantial 30 percent WoW surge.
As the market awaits the outcome of the IMF review, the positive indicators suggest that Pakistan’s stocks are well-positioned to sustain their current momentum, attracting both domestic and foreign investors.
