Karachi, August 5, 2023 – Pakistan’s stock market is anticipated to maintain a positive trajectory in the upcoming week, driven by several favorable factors, including the expected decision regarding the refinery policy and the resolution of circular debt.
Analysts from Arif Habib Limited have expressed confidence that these developments will bolster investor sentiment.
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The announcement of the refinery policy and the resolution of circular debt are highly anticipated events that are likely to have a significant impact on the stock market. As a result, investors are optimistic about the potential opportunities in various sectors and specific company stocks, especially with the ongoing result season, where robust financial results are expected.
The benchmark KSE-100 index of the Pakistan Stock Exchange (PSX) is currently trading at a price-to-earnings ratio (PER) of 3.9x for 2024, compared to its 5-year average of 5.8x. This indicates that the market is relatively undervalued, offering an attractive dividend yield of 10.1 percent, which is higher than its 5-year average of 6.7 percent.
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The positive sentiment in the market began last week and continued this week. The recent developments by the Special Economic Zones (SEZs) aimed at attracting foreign direct investment in the country have been well-received by investors. Additionally, the decision by the State Bank of Pakistan (SBP) to keep the policy rate unchanged at 22 percent further boosted investor confidence.
During the week, the market witnessed a significant surge and reached a 6-year high, crossing the 49,000 points level intraday. However, it is important to note that inflation has also surged to 28.3 percent in July 2023 compared to 24.9 percent in the same period last year.
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Several sectors have shown strong performance recently. Cement sales jumped by an impressive 57 percent year-on-year in July 2023. Moreover, urea and DAP volumetric sales increased by 36 percent and 69 percent year-on-year, respectively, during the same month. Additionally, there was a 10 percent and 11 percent year-on-year increase in the offtake of MoGas and HSD, respectively, in July 2023.
Foreign investors continued to show interest in the Pakistani market, with net buying amounting to USD 5.3 million during the week, compared to USD 2.8 million in the previous week. Major buying was witnessed in the Commercial Banks and Exploration & Production sectors. On the local front, selling was reported by Mutual Funds and Insurance Companies.
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The market closed at 48,586 points, registering an impressive 3.2 percent week-on-week gain, marking a positive return for the sixth consecutive week. Notably, sector-wise positive contributions came from Exploration & Production, Banks, Cement, and Automobile Assemblers. On the other hand, the Chemical, Sugar, and Tobacco sectors had negative contributions.
Among individual stocks, OGDC, HBL, MTL, PPL, and BAHL were among the major positive contributors, while UBL, COLG, EFERT, HUBC, and FABL made negative contributions.
The average trading volumes increased by 31 percent week-on-week, reaching 492 million shares, while the average value traded rose by 35 percent to USD 59 million.
As the market gears up for the anticipated announcements and with various sectors showing strong performance, investors are optimistic about the prospects for Pakistan’s stock market in the coming week.
