Pakistan’s stock market is expected to remain positive in the upcoming week due to the buyback of shares from companies, which will bring liquidity to the market.
This positive sentiment is likely to be reinforced by developments related to disbursement and commitment of funds from friendly countries and international creditors, which will help bridge the financing gap and bring the IMF program back on track.
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The benchmark KSE-100 index of Pakistan Stock Exchange (PSX) is currently trading at a PER of 3.9x (2023), which is lower than the Asia Pac regional average of 12.2x. Additionally, the PSX offers a dividend yield of 11.5 percent, compared to 3.0 percent offered by the region, making it an attractive investment opportunity.
This week, the market started on a positive note due to the robust financial results disclosed by major sectors. The announcement of the buyback of shares by LUCK (2nd Buyback) and HBL’s sponsor further boosted the sentiment. Furthermore, the trade deficit was reduced by 40 percent YoY, settling at USD 24 billion in 10MFY23, which kept the momentum bullish.
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However, inflation for the month of Apr’23 clocked-in at 36.4 percent YoY, a historic high level. Additionally, the Pak Rupee appreciated slightly against the USD, settling at PKR 283.59. Meanwhile, the SBP reserves arrived at USD 4.5 billion, down by USD 6 million WoW.
Sector-wise, positive contributions came from Commercial Banks, Cement, Fertilizer, Food & Personal Care Products, and Paper & Board, while negative contributions came from E&P, Technology, and Auto Assembler. Scrip-wise, positive contributors were LUCK, HBL, UBL, PKGS, and EFERT, while negative contribution came from PPL, SYS, POL, INDU, and TRG.
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Foreigners continued to sell, clocking in at USD 6.1 million compared to a net sell of USD 14.2 million last week, with major selling witnessed in Food & Personal Care and Other Sectors. On the local front, buying was reported by Individuals and NBFC. Average volumes arrived at 236 million shares while the average value traded settled at USD 28 million.
In conclusion, the buyback of shares and the expected influx of funds from friendly countries and international creditors are likely to keep the market positive in the upcoming week. Despite the high inflation rate, the PSX remains an attractive investment opportunity, offering a lower PER and higher dividend yield than the Asia Pac regional average. However, investors should keep an eye on the foreign selling trend and its impact on the market.
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