Karachi, September 16, 2023 – Investors in the Pakistan Stock Exchange (PSX) are gearing up to closely monitor economic developments during the upcoming week.
Analysts at Arif Habib Limited have highlighted that these economic developments are expected to significantly influence the direction of the market.
One of the key areas of focus for investors will be the movement of global crude oil prices. As global oil prices continue to rise, there is an anticipation of a corresponding increase in petroleum prices in Pakistan. Additionally, investors are also bracing for a potential rise in gas tariffs.
The benchmark KSE-100 index of the PSX is currently trading at a Price-to-Earnings Ratio (PER) of 3.5x for the year 2024, compared to its 5-year average of 5.7x. This offers an attractive dividend yield of approximately 11.0 percent, compared to its 5-year average of approximately 6.7 percent.
The past week saw mixed trends in the local bourse, with various economic developments contributing to market dynamics. Market sentiment was initially affected by market expectations of a policy rate hike, but the Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) ultimately decided to maintain the policy rate at 22 percent.
Furthermore, there were positive indicators in Pakistan’s economic landscape, including a substantial reduction in the current account deficit. In August 2023, the current account deficit shrank by 79 percent year-on-year (YoY), amounting to $160 million, compared to $774 million in the same period last year. Additionally, foreign direct investment (FDI) inflows for the first two months of fiscal year 2023-24 rose to $234 million, compared to $201 million in the same period last year.
In terms of foreign exchange reserves, the SBP’s reserves decreased by $140 million, reaching $7.6 billion during the past week. On the currency front, the Pakistani Rupee (PKR) gained strength against the US Dollar (USD), closing at PKR 296.85, marking a gain of PKR 6.1 or 2.05 percent week-on-week (WoW).
Despite these economic developments, the overall market closed at 45,754 points, declining by 260 points or 0.6 percent WoW. The negative contributions to the market came from sectors such as Commercial Banks, Fertilizers, Oil & Gas Exploration Companies, Food & Personal Care Products, and Technology & Communication. On the positive side, the Cement sector and Investment Banks/Companies/Securities Companies sector made significant contributions.
Foreign selling activity was notable during the week, amounting to $9.7 million in net selling, compared to a net buy of $0.6 million in the previous week. Major selling was observed in the Commercial Banks and Cement sectors. On the local front, buying activity was reported by Insurance Companies, followed by Other Organizations.
The average trading volumes for the week reached 161 million shares, up by 10 percent WoW, while the average value traded settled at $21 million, marking a 21 percent increase WoW.
In summary, investors in the PSX are gearing up for a week filled with economic developments, with a keen eye on factors such as global oil prices, petroleum prices, and gas tariffs, all of which are expected to impact market dynamics in the coming days.