Karachi, June 24, 2023: The Pakistan stock market is gearing up for a week of limited trading days as the country prepares to celebrate the upcoming Eid holidays.
As investors and traders prepare to take a break, the market will be closely monitoring the progress of the ninth review of the International Monetary Fund (IMF) program, which is set to conclude by the end of the week.
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The benchmark KSE-100 index of the Pakistan Stock Exchange (PSX) is currently trading at a price-to-earnings ratio (PER) of 3.3x (2023), significantly lower than the Asia Pacific regional average of 11.1x. Additionally, it offers an attractive dividend yield of approximately 12.6 percent, compared to the regional average of around 3.0 percent. These valuation metrics present potential opportunities for investors.
Throughout the week, the market experienced subdued activity, largely due to the prevailing uncertainty surrounding the completion of the ninth review of the IMF program. The outcome of this review will be crucial in determining the future course of action for Pakistan’s economic reforms and its engagement with international financial institutions.
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On the economic front, Pakistan recorded a current account surplus of USD 255 million in May 2023, a significant increase from the surplus of USD 78 million in April. Moreover, the government successfully raised over PKR 2.4 trillion through the auction of Treasury bills, indicating healthy demand for government securities.
However, there were some concerns as the State Bank of Pakistan’s foreign exchange reserves fell by USD 482 million to USD 3.5 billion. This decline in reserves can put pressure on the country’s external stability and may necessitate additional measures to manage the balance of payments.
The Pakistani Rupee (PKR) appreciated by PKR 0.46 (0.16 percent) against the US Dollar (USD) on a week-on-week basis, closing the week at 286.74/USD. This modest appreciation reflects relative stability in the currency market.
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Despite these economic developments, the market closed the week at 40,065 points, down by 1,236 points (-3.0 percent) on a week-on-week basis. Sector-wise, negative contributions came from commercial banks, fertilizers, technology and communication, chemicals, and oil and gas exploration companies. On the other hand, the tobacco sector made a positive contribution.
Among individual stocks, negative contributions were made by ENGRO, SYS, COLG, TRG, and UBL, while positive contributions came from SHEL, PAKT, UPFL, AGP, and MTL.
Foreign investors showed a renewed interest in the market this week, with net buying of USD 2.9 million compared to a net sell of USD 0.7 million the previous week. Major buying was witnessed in all other sectors and banks. However, on the local front, selling was reported by brokers and mutual funds.
During the week, the average trading volume declined by 19 percent to 131 million shares, while the average value traded decreased by 8 percent to USD 13 million.
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As the Eid holidays approach, market participants are looking forward to a period of rest and reflection. The conclusion of the ninth review of the IMF program will play a crucial role in shaping the future direction of Pakistan’s economy and its relationship with international financial institutions. Investors will be eagerly awaiting the resumption of trading activities after the holidays to assess the market’s response to these developments and explore new investment opportunities.
