In the upcoming week, investors at the Pakistan Stock Exchange (PSX) are expected to find some positivity following a reduction in political tension and recent statements from the International Monetary Fund (IMF).
Analysts from Arif Habib Limited have emphasized that market sentiment is heavily influenced by political developments.
READ MORE: Pakistan stocks gain 162 points following bail granted to Imran Khan
Discussions held at the IMF conference have shed light on the need for significant additional financing to successfully complete Pakistan’s long-delayed ninth review of the IMF bailout package. Consequently, any positive developments related to the IMF are likely to have a favorable impact on market sentiment and the overall performance of the index.
The benchmark KSE-100 index is currently trading at a price-to-earnings ratio (PER) of 3.9x (2023), which is comparatively lower than the Asia Pacific regional average of 12.3x. Additionally, it offers a higher dividend yield of 11.9 percent compared to the region’s 3.0 percent.
READ MORE: Pakistan stocks gain 251 points as IMF affirms talks
The market began on a negative note this week as Fitch ratings revealed that Pakistan is facing a substantial debt payment of USD 3.7 billion in the May-June 2023 period. Moreover, Pakistan’s absence from the IMF meetings dashed hopes for the resumption of the Extended Fund Facility (EFF) program with the IMF.
Significant political developments unfolded during the week, triggered by the arrest of former Prime Minister Imran Khan, which led to widespread protests and political instability. However, as the week progressed, the political situation relatively eased off.
READ MORE: Political turmoil leads to Pakistan stock market decline of 299 points
Furthermore, the State Bank of Pakistan (SBP) reported a decrease of USD 74 million in forex reserves, bringing the total to USD 4.38 billion. The Pakistani Rupee (PKR) depreciated by PKR 1.49 (0.53 percent) WoW against the USD, closing the week at 285.1/USD. Consequently, the market closed at 41,488 points, reflecting a decline of 754 points (1.8 percent) WoW.
Sector-wise, negative contributions to the index came from Oil & Gas Exploration Companies (220 points), Commercial Banks (212 points), Technology & Communication (164 points), Fertilizer (137 points), and Cement (83 points). On the other hand, the Tobacco (2.2 points) and Modarabas (0.3 points) sectors made positive contributions.
Among specific stocks, SYS (110 points), HBL (105 points), OGDC (103 points), PPL (76 points), and UBL (69 points) were the main negative contributors, while HMB (17 points), GLAXO (6 points), MUREB (4.6 points), FFC (2.5 points), and INDU (2.3 points) made positive contributions.
READ MORE: PSX sees sharp decline after PTI Chairman Imran Khan’s arrest
Foreign investors demonstrated buying activity during the week, with a total of USD 1.1 million compared to a net sell of USD 6.1 million in the previous week. Major buying was observed in the Banking sector (USD 0.8 million) and the Food & Personal Care sector (USD 0.3 million).
On the local front, selling was reported by Companies (USD 1.8 million) followed by Mutual Funds (USD 1.5 million). The average trading volumes stood at 133.5 million shares (down by 43 percent WoW), while the average value traded settled at USD 14.1 million (down by 50 percent WoW).
Overall, investors are cautiously optimistic about the upcoming week, considering the potential positive impact of eased political tension and any favorable developments in the IMF’s stance on Pakistan’s bailout package.
