Karachi, August 31, 2024 – The Pakistan Stock Exchange (PSX) is expected to maintain its positive momentum next week, beginning September 2, 2024, as ongoing corporate results continue to uplift market sentiment. Analysts at Arif Habib Limited have forecasted a positive outlook for the PSX in the coming week, driven by the ongoing results season and key economic indicators.
The corporate earnings season is in full swing, and positive results from major companies are likely to boost investor confidence further. The anticipation surrounding the upcoming corporate results has already created a buoyant atmosphere in the market. Analysts believe that the positive trajectory will continue, supported by robust earnings reports and key developments on the economic front.
Investors will also be closely monitoring any updates related to the International Monetary Fund (IMF). Recent market concerns stemmed from Pakistan’s absence from the IMF’s executive board meeting agenda for August 2024. However, any positive news or updates on this front could further support market sentiment and drive gains.
Additionally, the Pakistan Bureau of Statistics (PBS) is expected to report single-digit inflation for August 2024 in the upcoming week. A lower inflation rate could renew expectations of a potential rate cut by the State Bank of Pakistan (SBP), providing another boost to market sentiment. Lower inflation typically eases cost pressures on businesses and consumers, which can be a positive signal for equity markets.
Currently, the benchmark KSE-100 index of the PSX is trading at a price-to-earnings ratio (PER) of 4.1x for 2025, compared to its five-year average of 5.9x. The index is also offering a dividend yield of approximately 10.4%, compared to its five-year average of around 8.2%. These valuations suggest that the market is still trading at attractive levels, potentially enticing investors looking for value and income.
During the outgoing week, the PSX remained relatively lackluster due to concerns about Pakistan’s exclusion from the IMF’s meeting agenda. However, a mid-week upgrade of Pakistan’s credit rating by Moody’s from Caa3 to Caa2 provided a much-needed boost to investor confidence. Additionally, the repatriation of profit and dividend by foreign investors surged significantly by 64 times to USD 139.13 million in July 2024, compared to USD 2.16 million in the same period last year. This sharp increase in foreign repatriations is a positive sign of growing investor confidence in the country’s economic prospects.
There were other notable developments during the week. Saudi Arabia made an offer to buy a 15% stake in the Reko Diq mining project, a significant move that could attract further foreign investment into Pakistan’s mining sector. Moreover, the SBP’s foreign exchange reserves increased by USD 112 million week-over-week (WoW) to USD 9.4 billion. The Pakistani rupee also appreciated slightly against the US dollar, gaining PKR 0.20 or 0.07% to settle at 278.5. The market closed at 78,488.21 points, marking an increase of 313 points or 0.40% WoW.
On a sectoral basis, negative contributions to the index came from commercial banks (-369 points), cement (-138 points), pharmaceuticals (-96 points), technology & communication (-66 points), and leather & tanneries (-63 points). In contrast, positive contributions were seen in power generation & distribution (176 points), fertilizer (145 points), and chemicals (93 points). Among individual stocks, HBL (-162 points), BAHL (-81 points), MEBL (-80 points), UBL (-67 points), and SRVI (-63 points) were the major negative contributors. Conversely, HUBC (175 points), NBP (136 points), MARI (128 points), COLG (96 points), and MTL (74 points) were the top positive contributors.
Foreign buying was a highlight of the week, amounting to USD 3.7 million compared to a net sale of USD 0.6 million in the previous week. The major buying interest was observed in the exploration & production sector (USD 2.1 million) and technology & communication (USD 1.5 million). On the local front, banks and development finance institutions (DFIs) reported net selling of USD 3.9 million, followed by mutual funds at USD 3.3 million. Average trading volumes rose to 604 million shares, up by 4.5% WoW, while the average value traded increased to USD 67 million, up by 20.5% WoW.
With these positive trends and developments, the PSX is poised for another positive week ahead, driven by corporate earnings, economic indicators, and investor sentiment.
