The Pakistan Stock Exchange (PSX) is poised to maintain its bullish momentum in the coming week, driven by expectations of a significant interest rate cut. Analysts at Arif Habib Limited anticipate a 200 basis points reduction in the policy rate, potentially bringing it down to 13%. Investors are closely watching the upcoming Monetary Policy Committee (MPC) meeting scheduled for December 16, 2024, marking the final policy announcement for the year.
The KSE-100 Index, the PSX’s benchmark, is expected to extend its positive streak. Currently trading at a price-to-earnings ratio (PER) of 6.1x for 2025—below its 10-year average of 8.3x—it also offers an attractive dividend yield of approximately 7.9%, well above the 10-year average of 6.4%.
Recent Market Performance
This week, the PSX exhibited strong performance, with the KSE-100 Index surpassing the 115,000-point mark, buoyed by optimism around economic indicators and anticipation of a rate cut. The index closed at 114,302 points, a weekly gain of 5,248 points or 4.8%. Pakistan continues to rank as the world’s best-performing market in terms of US dollar-based returns for the second consecutive week.
Positive economic data supported the bullish sentiment. November 2024 saw remittances surge by 29% year-on-year to $2.9 billion, while automobile sales jumped by 52% YoY during the same period. Additionally, a reduction in National Savings Schemes rates and declining cut-off yields for treasury bills reinforced the market’s confidence. The State Bank of Pakistan’s reserves increased slightly by $13 million to $12.1 billion.
Sector and Scrip Performance
Sector-wise, the Oil & Gas Exploration sector contributed the most to the index’s gains (3,175 points), followed by Fertilizer (1,767 points), Oil & Gas Marketing Companies (589 points), Cement (432 points), and Technology & Communication (403 points). On the flip side, Commercial Banks dragged the index down by 2,292 points, with minor negative contributions from Automobile Parts (18 points) and Cable & Electrical Goods (16 points).
Notable scrip-wise gainers included MARI (1,921 points), FFC (1,193 points), OGDC (592 points), PPL (585 points), and PSO (420 points). Conversely, key laggards were UBL (-465 points), MEBL (-392 points), BAHL (-350 points), MCB (-329 points), and HBL (-232 points).
Foreign and Local Trading Activity
Foreign selling persisted at the PSX, albeit at a reduced net outflow of $0.9 million compared to $14.2 million last week, with major sell-offs in Fertilizer ($3.7 million) and Exploration & Production ($3.6 million). Local funds, however, provided significant support, recording net buying of $40.9 million.
Average trading volumes for the week stood at 1,362 million shares, reflecting a 19.1% decline week-on-week, while the average traded value rose by 10.2% to $218 million.
The PSX outlook remains robust, with the expected rate cut likely to sustain investor confidence in the near term.