Karachi, September 9, 2023 – Investors at the Pakistan Stock Exchange (PSX) are likely to exercise caution in the coming week due to the upcoming monetary policy announcement scheduled for September 14, 2023.
Analysts at Arif Habib Limited have indicated that market participants will closely monitor economic developments as they are expected to have a significant impact on the market’s direction.
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With the monetary policy announcement on the horizon, investors are expected to maintain a cautious stance. Additionally, the ongoing results season has put the energy sector in the spotlight, with anticipation of robust financial results.
As of now, the benchmark KSE-100 index of PSX is trading at a price-to-earnings ratio (PER) of 3.6x for 2024, compared to its 5-year average of 5.7x. This offers a dividend yield of approximately 11.0 percent, as compared to its 5-year average of around 6.7 percent.
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The market began the week on a positive note following news that Saudi Arabia is expected to invest USD 25 billion in Pakistan. Furthermore, the Pakistani Rupee appreciated sharply in the open market following a crackdown on foreign currency smuggling. This boost in confidence among investors contributed to positive sentiment in the local stock market.
In terms of key economic indicators, cotton arrival data showed an impressive 98 percent year-on-year jump, reaching 3,041K bales on August 31, 2023, compared to 1,540K bales in the same period last year. Urea and DAP offtake also experienced significant increases of 18 percent and 10x year-on-year, respectively, in August 2023. Moreover, sales of Motor Spirit (MS) and High-Speed Diesel (HSD) increased by 5 percent and 11 percent year-on-year, respectively, in August 2023. Similarly, cement dispatches climbed by an impressive 37 percent year-on-year in the same month. However, a notable increase in cut-off yields of Treasury Bills has signaled the possibility of a hike in the State Bank of Pakistan’s interest rates in the upcoming Monetary Policy Committee meeting next week, which is expected to keep the market cautious.
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In the foreign exchange market, the USD/PKR parity settled at PKR 302.95, appreciating by PKR 2.52, or +0.82 percent, week-on-week. Despite these developments, the KSE-100 index managed to close at 46,013 points, up by 701 points, or +1.5 percent, week-on-week.
Sector-wise, positive contributions came from Fertilizer (171 points), Exploration & Production (94 points), Oil Marketing Companies (78 points), Commercial Banks (77 points), and Power (74 points). In contrast, the Pharmaceuticals sector (-12 points) and Automobile Assemblers (-4 points) were the main contributors to negative performance.
Scrip-wise, positive contributors included DAWH (102 points), PPL (85 points), ENGRO (58 points), MEBL (52 points), and HUBC (47 points). Conversely, negative contributions came from BAHL (-44 points), LUCK (-36 points), INDU (-17 points), POL (-15 points), and HMB (-12 points).
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Foreign buying continued during the week, totaling USD 0.6 million, although this was a decline compared to a net buy of USD 3.3 million the previous week. Notably, major buying activity was observed in the Commercial Banks sector (USD 1.2 million) and Exploration & Production (USD 0.7 million). On the domestic front, selling was reported by Mutual Funds (USD 2.5 million) followed by Banks/DFIs (USD 1.5 million).
Average trading volumes during the week stood at 146 million shares, down by 31 percent week-on-week, with the average value traded settling at USD 17 million, down by 36 percent week-on-week.
In conclusion, the impending monetary policy announcement, along with economic indicators and global factors, are expected to influence the PSX in the coming week. Investors are advised to exercise caution and closely monitor market developments.
