Karachi, January 13, 2024 – Analysts at Arif Habib Limited are optimistic about a positive trend in the Pakistan stock market for the upcoming week. In their weekly report, they have projected the benchmark KSE-100 index of the Pakistan Stock Exchange (PSX) to maintain a positive trajectory in the coming days.
One significant factor contributing to this optimism is the recent letter from the Prime Minister seeking the rollover of a USD 2 billion loan to the UAE, which is scheduled to mature in the upcoming week. Analysts believe that a successful rollover of this loan could enhance Pakistan’s foreign reserve position, serving as a confidence booster for investors in the stock market.
Additionally, attractive valuations of various stocks are expected to further fuel positive sentiment within the market. The KSE-100 is currently trading at a Price-to-Earnings Ratio (PER) of 4.4x for the year 2024, compared to its 5-year average of 5.9x. Furthermore, it offers a dividend yield of approximately 10.3 percent, surpassing its 5-year average of around 6.0 percent.
Throughout the previous week, the local market displayed a range-bound trajectory. Positive economic developments, including the approval of the second Stand-By Arrangement (SBA) tranche by the IMF’s Executive Board amounting to USD 700 million, contributed to economic stabilization. Remittances for December 2023 reached USD 2.4 billion, showing a substantial 13 percent Year-on-Year (YoY) and 5 percent Month-on-Month (MoM) increase.
Moreover, a noteworthy decline in cut-off yields for the 3-year, 5-year, and 10-year Pakistan Investment Bonds (PIBs) by 45bps, 44bps, and 59bps, respectively, indicated positive financial market conditions. The State Bank of Pakistan’s reserves also increased by USD 66 million, reaching a total of USD 8.2 billion.
Sector-wise positive contributions came from Oil & Gas Exploration Companies, Fertilizer, Automobile Assemblers, Miscellaneous, and Engineering. On the flip side, negative contributions were mainly from Commercial Banks, Cement, Technology & Communication, Oil & Gas Marketing Companies, and Refinery sectors.
Scrip-wise positive contributors included ENGRO, PPL, MARI, EFERT, and INDU, while negative contributions came from UBL, MEBL, TRG, SYS, and DGKC.
Foreigner buying was witnessed during the week, totaling USD 1.9 million, compared to a net sell of USD 3.1 million in the previous week. Major buying activities were observed in the Fertilizer and Other sectors. On the local front, selling was reported by Banks/DFIs and Broker Proprietary Trading.
Average volumes in the market saw a decrease of 18.5 percent Week-on-Week (WoW), settling at 560 million shares, while the average value traded was USD 57 million, down by 18.1 percent WoW.
As Pakistan’s stock market braces for the upcoming week, investors are closely watching these indicators, with hopes that positive developments and a stable economic environment will continue to drive the market towards favorable trends.
