The Pakistan stock market is anticipated to continue its bullish trend in the upcoming week, spurred by promising advancements on the COVID-19 vaccine front and its gradual rollout globally, which are expected to maintain strong investor interest in equities.
Analysts at Arif Habib Limited have expressed optimism, citing expectations of robust corporate profitability during the outgoing quarter, particularly in cyclical sectors, as a key factor that should keep sentiment positive at the Pakistan stock market. The benchmark KSE-100 index of the Pakistan Stock Exchange (PSX) is currently trading at a price-to-earnings ratio (PER) of 7.7x for 2021, significantly lower than the Asia Pacific regional average of 18.0x. Furthermore, the KSE-100 is offering an attractive dividend yield (DY) of approximately 6.0 percent, compared to the regional average of around 2.5 percent.
The KSE-100 Index kicked off the New Year with renewed optimism, led by a bullish surge in Independent Power Producers (IPP) stocks, following the announcement of a plan to resolve circular debt issues. Additionally, oil prices saw a notable jump of 7.8 percent week-on-week (WoW), bolstered by reports of Russia abstaining from pushing for an output increase in February.
Anticipations surrounding the announcement of a new textile policy and the circular debt resolution plan have also generated optimism in textile stocks. Banking stocks, particularly those of large banks, attracted significant interest due to the country’s economic recovery and a considerably improved loan growth outlook. The domestic equity market closed at 45,654 points, marking a gain of 1,220 points WoW.
Sector-wise, the positive contributions at the Pakistan stock market came from Banks (+561 points), Fertilizers (+224 points), Oil & Gas Exploration (+153 points), Power Generation & Distribution (-66 points), and Chemicals (+47 points). Key scrip-wise positive contributions were led by UBL (+154 points), HBL (+117 points), MEBL (+90 points), DAWH (+88 points), and MCB (+80 points).
Foreign investors showed renewed interest at Pakistan stock market, with net buying clocking in at USD 3.4 million compared to a net sell of USD 46.22 million the previous week. Buying was notably strong in Commercial Banks (USD 3.64 million) and Technology (USD 2.0 million). On the domestic front, significant selling was reported by Insurance Companies (USD 8.1 million) and Banks/DFIs (USD 8.1 million). The average trading volumes increased by 18 percent WoW to 625 million shares, while the average value traded rose by 8 percent WoW to USD 153 million.
Overall, the market outlook remains positive for Pakistan stock market, supported by vaccine rollouts, corporate profitability expectations, and favorable sector-specific developments, indicating that the bullish trend in the Pakistan stock market is likely to persist.