Karachi, December 23, 2023 – The Pakistan Stock Exchange (PSX) is bracing for a lackluster response in the upcoming week starting December 26, 2023, following a tumultuous week that witnessed a market bloodbath.
Analysts at Arif Habib Limited are predicting subdued interest from foreign investors during the holiday season, compounded by the upcoming rollover period that investors will be closely monitoring.
The recent market downturn saw investors booking profits across various sectors, leading to the market closing in the red. In addition to the internal market dynamics, external factors such as the Asian Development Bank’s (ADB) announcement of a USD 1.2 billion loan agreement with Pakistan and the World Bank’s approval of USD 350 million financing for Rise-II have added to the overall economic landscape.
Despite these external injections, analysts point out that stocks continue to present attractive valuations, potentially enticing investors looking for long-term opportunities. The benchmark KSE-100 index of the PSX is currently trading at a Price-to-Earnings Ratio (PER) of 4.2x (2024), compared to its 5-year average of 5.9x. Furthermore, the dividend yield stands at approximately 10.8 percent, significantly higher than its 5-year average of approximately 6.0 percent.
In economic developments, after June 2023, Pakistan recorded a monthly current account surplus of USD 9 million. Additionally, the Economic Coordination Committee (ECC) approved a proposal from the Power Division to settle dues to government-owned power plants (GPPs) using a supplementary grant of Rs262 billion. The ECC also approved the release of an advance subsidy of PKR 57 billion concerning K-Electric arrears. However, power generation costs saw a notable rise of nearly 20 percent YoY in November 2023, primarily attributed to an increase in generation from expensive fuels.
Moreover, the State Bank of Pakistan’s (SBP) reserves witnessed a decline of USD 138 million, reaching USD 6.9 billion during the week.
The Pakistani Rupee (PKR) closed at 282.53 against the US dollar, appreciating by 0.73 percent week-on-week. However, the overall market closed at 61,705 points, reflecting a decline of 6.7 percent week-on-week, with sector-wise negative contributions coming from Commercial Banks, Fertilizer, Oil & Gas Exploration Companies, Cement, and Technology & Communication. Conversely, the Miscellaneous sector made a positive contribution.
Scrip-wise negative contributors included MCB, OGDC, ENGRO, DAWH, and FFC, while PSEL, ILP, PKGP, and PABC made positive contributions.
Foreigner buying continued, amounting to USD 2.4 million compared to a net buy of USD 6.3 million the previous week. Power Generation & Distribution and Cement were the major sectors witnessing foreign investments. On the local front, selling was reported by Mutual Funds (USD 14.3 million) and Individuals (USD 2.6 million). Average volumes decreased by 3 percent week-on-week, with the average value traded settling at USD 78 million, down 27 percent from the previous week.
In conclusion, the PSX is facing a challenging week marked by uncertainty, with both domestic and global factors contributing to the market’s recent volatility. Investors are advised to tread cautiously as they navigate through these turbulent times, keeping a keen eye on market trends and economic developments.
