Karachi, October 26, 2024 – The stock market is poised to maintain its bullish momentum next week as investors anticipate a significant policy rate cut, according to analysts at Arif Habib Limited.
The positive sentiment at the stock market has been fueled by expectations of improved financial performance during earnings season, with key stocks likely to stay in the spotlight due to optimistic financial outlooks.
The benchmark KSE-100 index of Pakistan Stock Exchange (PSX) closed the week on a high, hitting an intraday peak above 90,000 points on Friday, driven by the anticipation of an interest rate cut during the upcoming Monetary Policy Committee (MPC) meeting on November 4, 2024. This potential rate reduction has bolstered investor confidence and drawn increased trading activity in key sectors.
Presently, the KSE-100 index is trading at a price-to-earnings ratio (PER) of 4.5x for 2025, below its five-year average of 5.9x. The index also offers a dividend yield of around 9.7%, surpassing its five-year average of approximately 8.1%.
On the economic front, Pakistan reported a current account surplus of USD 119 million in September 2024, contrasting with a deficit of USD 218 million in the same period last year. Despite a 6.4% year-over-year decline in power generation, which totaled 12,487 GWh in September, the State Bank of Pakistan’s reserves reached a two-year high of USD 11 billion, an increase of USD 18 million on a weekly basis. Meanwhile, the Pakistani Rupee showed slight depreciation, closing at 277.6 against the USD. As a result, the PSX ended the week at 89,994 points, up by 4,744 points or 5.6%, making it the world’s best-performing market in terms of USD gains.
The market’s rally saw significant sectoral contributions, particularly from the fertilizer (+1,385 points), cement (+929 points), commercial banking (+848 points), oil & gas exploration (+371 points), and technology & communication sectors (+238 points). In contrast, the textile composite (-51 points), transport (-19 points), and sugar & allied industries (-4 points) sectors reported minor negative contributions. Leading individual stock contributors included FFC (+853 points), UBL (+374 points), EFERT (+235 points), OGDC (+206 points), and LUCK (+203 points), while stocks such as ILP (-87 points), POL (-41 points), INDU (-24 points), PIBTL (-19 points), and BAFL (-18 points) lagged behind.
Foreign investors continued their selling trend, with net sales reaching USD 16.4 million, primarily in the banking (USD 8.5 million) and oil marketing company (OMC) sectors (USD 2.6 million). On the domestic front, mutual funds led the buying spree with purchases totaling USD 12.1 million, followed by other local organizations at USD 8.3 million. The average trading volume rose by 51.5% week-on-week to 670 million shares, while the average value traded increased by 29.6% to USD 105 million.
As the MPC meeting approaches, investor enthusiasm is expected to remain high, particularly for key financial and industrial stocks that are anticipated to perform well with the expected rate cuts. The anticipated rate cut could bring further relief to debt-heavy sectors, supporting overall economic stability. With the local economy showing signs of resilience, analysts project continued market buoyancy, making PSX an attractive destination for both institutional and individual investors in the coming weeks.