Karachi, September 7, 2024 – The Pakistan Stock Exchange (PSX) is anticipated to remain positive in the upcoming week, starting September 9, 2024, as market participants look forward to a possible rate cut during the Monetary Policy Committee (MPC) meeting scheduled for September 12.
Analysts at Arif Habib Limited forecast a potential 1.5% reduction in the policy rate, a move expected to buoy investor sentiment and drive market activity.
The anticipated rate cut is seen as a reaction to the recent drop in inflation, which fell to a 34-month low of 9.6%. This has fueled expectations of more accommodative monetary policy, prompting optimism across the market. The benchmark KSE-100 index of the PSX is currently trading at a price-to-earnings ratio (PER) of 4.1x (2025), compared to its 5-year average of 5.9x, offering an attractive dividend yield of around 10.3% compared to its 5-year average of 8.2%.
In addition to the expected rate cut, any developments regarding Pakistan’s ongoing negotiations with the International Monetary Fund (IMF) will also play a key role in shaping market movements. The government remains hopeful of fulfilling all the IMF’s conditions, which could secure approval for Pakistan’s case from the lender’s board. This would provide much-needed stability to the economy and further bolster investor confidence.
Recent economic indicators have shown mixed trends. Pakistan’s trade deficit narrowed to USD 1.7 billion in August 2024, the lowest in 11 months, while petroleum sales declined by 14% year-over-year (YoY) during the same period. Sales of urea and diammonium phosphate (DAP) fertilizers also fell sharply by 14% and 70% YoY, respectively, while total cement sales dropped by 26% YoY in August. On a positive note, the State Bank of Pakistan’s reserves saw a modest week-on-week increase of USD 33 million, bringing total reserves to USD 9.4 billion.
During the past week, the KSE-100 index of PSX closed at 78,898 points, gaining 410 points, or 0.5% week-on-week (WoW). Key sectoral contributors to this positive performance included exploration and production (E&P), cement, fertilizers, power generation, and the auto sector. On the downside, commercial banks, chemicals, and technology sectors weighed on the index.
Foreign investors registered net selling of USD 6.7 million at the PSX, compared to a net buy of USD 3.7 million the previous week, with notable outflows from the fertilizer and E&P sectors. In contrast, local investors, particularly individuals, stepped in with net buying of USD 5.7 million. Average daily trading volumes increased by 11.8% WoW, reaching 676 million shares, while the average daily traded value surged by 22.5%, settling at USD 52 million.
