KARACHI: Analysts at Arif Habib Limited anticipate a positive turn for Pakistan’s stock market in the upcoming week, fueled by the government’s successful fulfillment of prerequisites for the resumption of the International Monetary Fund (IMF) program.
Additionally, commitments from friendly nations such as Saudi Arabia and the UAE are expected to inject optimism into the market, marking a potential revival of the overall market sentiment.
The benchmark KSE-100 index of the Pakistan Stock Exchange (PSX) has been trading at a remarkably low price-to-earnings ratio (PER) of 3.9x (2023), in stark contrast to the Asia Pacific regional average of 12.2x. Furthermore, the market offers an enticing dividend yield of 11.2 percent, dwarfing the 3.0 percent offered by the broader region. This underscores the fact that Pakistan’s stock market is undervalued and holds substantial growth potential.
The recently concluded three-day week post-Eid commenced on a positive note, with optimism soaring over the anticipation of robust quarterly financial results in major sectors. Investor sentiment received an additional boost when the finance minister confirmed on Monday that all IMF conditions had been met, and the government was actively securing another USD 3 billion from international creditors. This additional funding is expected to pave the way for the swift revival of the IMF program.
In the political arena, a noteworthy decrease in temperature was observed as all major political parties initiated talks to decide a date for upcoming elections. The State Bank of Pakistan (SBP) reserves also saw a positive uptick, increasing by USD 30 million during the week.
Despite these positive indicators, the Pakistani Rupee experienced a slight depreciation against the US Dollar by PKR 0.38 | 0.13 percent WoW, closing the week at PKR 283.8. Nevertheless, the market managed to close at 41,581 points, gaining 573 points, reflecting a notable increase of 1.40 percent WoW.
Sector-wise contributions to the positive momentum came from Commercial, Fertilizer, Miscellaneous, Chemical, and Pharmaceuticals. On the flip side, negative contributions were noted from Technology & Communication, Glass & Ceramics, and Transport. Scrip-wise, positive contributors included UBL, DAWH, MARI, MEBL, and FFC, while negative contributions were seen from HBL, SYS, PPL, OGDC, and ENGRO.
Foreigners continued their selling spree during the week, with net selling totaling USD 14.2 million, compared to a net sell of USD 0.3 million in the preceding week. Conversely, on the local front, buying was reported by both companies and individuals. Average trading volumes reached 208 million shares, with the average value traded settling at USD 25 million.
The fulfillment of prerequisites for the resumption of the IMF program, coupled with commitments from friendly countries, marks positive developments for Pakistan’s stock market. The combination of an undervalued market, impending quarterly financial results, and a relatively stable political environment is likely to elevate investor sentiment. While foreign selling remains a concern, local buying is expected to provide crucial support to the market. In essence, Pakistan’s stocks are poised for a favorable trajectory in the coming week, offering a glimpse of optimism for investors and market participants alike.
