Karachi, July 8, 2023 – Pakistan stocks are expected to maintain their optimistic outlook next week following a staff-level agreement reached with the International Monetary Fund (IMF).
According to analysts at Arif Habib Limited, the recent agreement between the Pakistani government and the IMF has sparked positivity in the market. It is anticipated that the government will now explore new financing opportunities from bilateral and multilateral sources. Market participants eagerly await the upcoming IMF Executive Board meeting scheduled for July 12, 2023, where the approval of the agreement will be considered.
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Once the agreement is approved, the initial tranche of funds will be disbursed, providing further momentum to sentiment in the local stock exchange.
At present, the benchmark KSE-100 index of the Pakistan Stock Exchange (PSX) is trading at a price-to-earnings ratio (PER) of 3.6x (2024), compared to its five-year average of 5.9x. Additionally, it offers a dividend yield of approximately 10.9 percent (2024), higher than its five-year average of around 6.6 percent.
This week witnessed a strong start for the PSX, with bullish investors responding positively to the news of the IMF staff-level agreement for a Stand-by Arrangement facility worth USD 3 billion. The KSE-100 index experienced a significant surge, gaining 2,446 points on Monday, marking the highest single-day gain ever.
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Furthermore, inflation in Pakistan eased for the first time in seven months, reaching 29.4 percent in June 2023, compared to 38 percent in May 2023.
The Pakistani Rupee also strengthened against the USD throughout the week, closing at PKR 277.90, representing a gain of PKR 8.09 (+2.83 percent) WoW.
Moreover, the State Bank of Pakistan’s reserves increased by USD 393 million WoW, reaching USD 4.4 billion as of June 30, 2023. With a weekly USD-based return of 9.75 percent (PKR-based return of 6.6 percent), the PSX remained the world’s best performing market.
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Foreign investors showed increased interest this week, with a net buying of USD 4.7 million, compared to a net buy of USD 1.3 million the previous week. Notably, significant buying was observed in the banking sector (USD 3.8 million) and the technology and communications sector (USD 1.7 million). On the local front, selling was reported by banks and development finance institutions (USD 5.5 million), followed by companies (USD 2.9 million).
The average trading volume saw a rise of 47 percent WoW, reaching 340 million shares, while the average value traded settled at USD 41 million, marking a 63 percent WoW increase.
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With the positive sentiment generated by the staff-level agreement with the IMF, coupled with the favorable market conditions and increasing foreign investments, market participants are hopeful for a promising week ahead in the Pakistani stock market.
