The Pakistan Stock Exchange (PSX) is expected to maintain its upward trajectory in the upcoming week, with analysts at Arif Habib Limited forecasting further gains fueled by declining inflation expectations. Analysts predict that the inflation rate for November 2024 will ease to 4.7% year-on-year (YoY), a development likely to boost investor sentiment and push the PSX higher.
The benchmark KSE-100 index, currently trading at an attractive price-to-earnings ratio (PER) of 5.7x for 2025—well below its 10-year average of 8.3x—is expected to continue attracting investor interest. Moreover, the PSX offers a dividend yield of around 8.5%, which exceeds its 10-year average of 6.4%, making it an appealing option for income-focused investors looking for value in the market.
The week that just concluded started on a negative note, with the PSX losing around 3,500 points due to rising political uncertainty. However, as political tensions eased, the PSX swiftly recovered, ultimately surpassing the 100,000-point mark. The recovery was driven by expectations of lower inflation and a strong rally in commercial banks following the removal of the Minimum Deposit Rate (MDR). During the T-bill auction held this week, the State Bank of Pakistan (SBP) raised a significant PKR 2,494 billion, well above the target of PKR 800 billion, which further fueled optimism on the PSX. Additionally, the yields on government securities fell, with the 3-month yield reaching its lowest point since April 2022, and the 6-month and 12-month yields dropping to levels last seen in March 2022.
SBP’s foreign reserves saw a notable increase of USD 131 million on a week-over-week (WoW) basis, closing at USD 11.4 billion, adding to the positive sentiment surrounding the PSX. Meanwhile, the Pakistani Rupee (PKR) depreciated slightly by 0.10% WoW, ending the week at 278.04 against the US Dollar.
At the close of the week, the KSE-100 index stood at 101,357 points, reflecting a gain of 3,559 points, or +3.64% WoW. Positive contributions came from sectors like Commercial Banks, Technology & Communication, and Oil & Gas Exploration, while sectors such as Miscellaneous, Automobile Assembler, and Automobile Parts & Accessories detracted from the PSX’s overall performance.
Foreign investors continued their selling spree, recording net outflows of USD 15.1 million, although this marked an improvement compared to the previous week’s USD 33.0 million in net selling. Major foreign selling was seen in the banking and fertilizer sectors, while local buying came from insurance companies and individual investors.
Trading volumes on the PSX averaged 979 million shares, showing a slight decline of 1.2% WoW, while the average value traded rose by 7.1% to USD 133 million. With inflation easing and attractive valuations, analysts expect the PSX’s rally to continue in the coming week.
