Karachi, October 28, 2023 – Analysts at Arif Habib Limited have expressed optimism about the Pakistan Stock Exchange (PSX) maintaining its positive momentum in the week starting from October 30, 2023.
A stable monetary policy is anticipated to provide a boost to investor confidence, and with the impending visit of an International Monetary Fund (IMF) team next week, the market will closely monitor developments related to that event.
The benchmark KSE-100 index is currently trading at a Price-to-Earnings Ratio (PER) of 4.0x for the year 2024, compared to its 5-year average of 5.7x. It also offers an attractive dividend yield of approximately 11.9 percent, compared to its 5-year average of about 6.7 percent.
The week began on a positive note, primarily driven by the approval of the long-awaited gas tariff hike by the Economic Coordination Committee (ECC). This move is seen as a significant step toward meeting one of the prerequisites for the IMF’s upcoming review scheduled to commence on November 2, 2023. Notably, in September 2023, the Current Account deficit was recorded at USD 8 million, reflecting a 95 percent month-on-month decrease. The positive momentum was further bolstered by the ongoing results season, contributing to the market’s sustained positive trajectory.
However, the consistent appreciation of the Pakistani Rupee (PKR) came to an end, resulting in the PKR closing at PKR 280.57 against the US dollar, depreciating by PKR 1.77, equivalent to 0.64 percent on a week-on-week basis. Additionally, the State Bank of Pakistan’s (SBP) reserves decreased by USD 220 million during the last week, reaching USD 7.5 billion. Despite these factors, the market closed at 50,944 points, marking an increase of 212 points or 0.42 percent on a week-on-week basis.
Positive contributions from various sectors include:
• Commercial Banks (369 points)
• Cement (71 points)
• Power Generation & Distribution (41 points)
• Leather & Tanneries (30 points)
• Automobile Assemblers (24 points)
On the flip side, sectors that contributed negatively were:
• Fertilizer (164 points)
• Technology & Communication (102 points)
Among the individual companies, positive contributions came from:
• Bank AL Habib (BAHL) (304 points)
• MCB Bank (MEBL) (62 points)
• Hub Power Company (HUBC) (50 points)
• Pakistan State Oil (PSO) (43 points)
• Oil and Gas Development Company (OGDC) (40 points)
Negative contributions came from:
• Habib Bank Limited (HBL) (78 points)
• Engro Corporation (ENGRO) (76 points)
• Fauji Fertilizer Company (FFC) (73 points)
• Pakistan Petroleum Limited (PPL) (66 points)
• TRG Pakistan (TRG) (61 points)
Foreign selling was observed during the week, amounting to USD 3.47 million, compared to a net purchase of USD 2.32 million in the previous week. Major selling activities were observed in the Technology and Communication sector (USD 4.73 million) and Food and Personal Care Products (USD 0.4 million). On the local front, buying was reported by companies (USD 6.4 million) followed by individuals (USD 4.2 million). The average trading volume reached 366 million shares, a 10 percent decrease week-on-week, while the average traded value settled at USD 46 million, reflecting a 1.9 percent increase week-on-week.
The positive outlook for PSX in the upcoming week is driven by a combination of factors, including the stable monetary policy, the anticipation of an IMF visit, and the ongoing positive results season. While there have been some currency fluctuations and fluctuations in the SBP’s reserves, the overall market sentiment remains positive. Investors will be keeping a close watch on developments in the coming week to gauge the market’s trajectory.
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