Karachi, July 28, 2023 – As the week comes to a close, analysts are optimistic about the Pakistan stocks ability to sustain its positive momentum in the coming week.
The bullish sentiment is primarily driven by the anticipation of strong financial results and positive economic developments in the country.
Analysts from Arif Habib Limited have expressed their confidence in the market’s upward trajectory, citing the forthcoming announcement of financial results as a key factor. Investors eagerly await these results as they are expected to provide valuable insights into the performance and profitability of various companies.
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However, market participants are also closely monitoring the upcoming monetary policy decision by the State Bank of Pakistan (SBP), scheduled for July 31, 2023. The central bank’s policy decisions can have a significant impact on market sentiment and liquidity, and any unexpected changes may influence stock prices.
The benchmark KSE-100 index of the Pakistan Stock Exchange (PSX) is currently showing promising indicators. It is trading at a price-to-earnings ratio (PER) of 3.8x (2024), which is lower than its five-year average of 5.9x. Moreover, the dividend yield stands at an attractive 10.4 percent, compared to the five-year average of 6.6 percent. These figures suggest that stocks are undervalued, making them potentially attractive to investors.
Throughout the outgoing week, the stock market experienced a significant upward trend, buoyed by various positive economic developments. Notably, China’s decision to extend a USD 2.4 billion loan repayment period without raising its markup was well-received by investors. This gesture reflects the continued support of a major economic partner and added to the positive sentiment in the market.
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Another contributing factor to the market rally was the announcement of a collaboration between five Pakistani state-owned enterprises and Saudi Arabia. The collaboration aims to execute a substantial USD 10 billion refinery project within Pakistan, signaling potential economic advancements for the country. These developments have fueled investor optimism, propelling the market to surpass the 47,000 level, a significant milestone since November 2021.
In addition to the positive stock market performance, the Pakistani rupee (PKR) also showed strength against the US dollar. During the week, the PKR appreciated and closed at PKR 286.45 against the USD, representing a gain of PKR 0.36 or 0.13 percent week-on-week (WoW).
Sector-wise, the stock market saw positive contributions from various sectors. Banks, E&P (Exploration and Production), Power, and OMCs (Oil Marketing Companies) were among the top performers. Conversely, the Fertilizer, Automobile Parts, and Tobacco sectors made modest negative contributions.
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Regarding foreign investments, foreign buyers continued to show interest in the Pakistani market during the week, with net buying clocking in at USD 2.8 million. While this amount is lower than the previous week’s net buy of USD 5.4 million, foreign investors remain active, particularly in the E&P and Banking sectors. On the local front, Mutual Funds were net sellers with USD 6.0 million, followed by Insurance Companies with USD 1.8 million.
The week saw increased trading activity, with average volumes reaching 376 million shares, a 5 percent increase WoW. The average value traded also rose significantly to USD 44 million, marking a 37 percent increase WoW.
With these positive indicators and promising economic developments, investors are hopeful that the Pakistan stock market will continue its upward trajectory in the coming week. As always, caution and careful analysis remain crucial in navigating the dynamic stock market landscape.
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