Stock Market Investors to Monitor 2024-25 Budget Next Week

Stock Market Investors to Monitor 2024-25 Budget Next Week – Stock market investors are gearing up to closely monitor developments related to the Federal Budget 2024-25 in the upcoming week commencing on June 3, 2024. Analysts at Arif Habib Limited are optimistic about a positive momentum and suggest that the anticipation surrounding the budget will play a crucial role in shaping market sentiments.

In addition to the budget, the launch of a new program with the International Monetary Fund (IMF) is expected to significantly boost investor confidence at the stock market. This potential agreement with the IMF is seen as a positive catalyst that could enhance market sentiment and provide much-needed stability to Pakistan’s economic outlook.

Currently, the benchmark KSE-100 index of the Pakistan Stock Exchange (PSX) is trading at a price-to-earnings ratio (PER) of 4.3x for 2025, which is notably lower than its 5-year average of 6.1x. The market is offering a dividend yield of approximately 9.6%, compared to a 5-year average of around 7.3%.

This past week, the stock market exhibited mixed sentiment, influenced by anticipation of the Federal Budget 2024-25 and the State Bank of Pakistan’s (SBP) monetary policy rate announcement. The government successfully raised Rs 501 billion through a treasury bills auction, with cut-off yields across all tenors declining between 29 and 60 basis points. Additionally, secondary market yields saw a decline ranging from 1 to 44 basis points.

However, the SBP’s foreign exchange reserves decreased by USD 63 million week-on-week (WoW) to USD 9.09 billion. Concurrently, the Pakistani Rupee depreciated by PKR 0.12 (0.04% WoW), settling at 278.3 against the US dollar. The KSE-100 index experienced a minor decline of 105 points (0.14%), closing at 75,878 points.

Sector-wise, negative contributions to the stock market came from Exploration & Production (286 points), Fertilizer (121 points), Oil Marketing Companies (89 points), Refinery (28 points), and Textile Composite (27 points). Conversely, sectors contributing positively included Technology (174 points), Leather & Tanneries (97 points), and Power (81 points). Notable scrip-wise decliners were FFC (128 points), OGDC (117 points), BAHL (82 points), PPL (77 points), and BAFL (56 points). Positive contributions came from SYS (179 points), HUBC (108 points), SRVI (97 points), MEBL (71 points), and MTL (66 points).

Foreign buying was notable at the stock market, with net inflows of USD 5.5 million, a significant turnaround from the net selling of USD 12.1 million the previous week. Major foreign buying occurred in Commercial Banks (USD 2.7 million) and other sectors (USD 1.9 million). On the local front, Mutual Funds and Companies were net sellers, offloading USD 8.9 million and USD 8.0 million, respectively. Average trading volumes fell by 19.9% WoW to 447 million shares, while the average value traded dropped by 5.2% WoW to USD 61.4 million.

As the new week approaches, all eyes will be on the budget developments and the IMF program, which are expected to steer stock market trends.