Weekly Review: PSX investors’ sentiments linked to IMF program

Weekly Review: PSX investors’ sentiments linked to IMF program

Investors of Pakistan Stock Exchange (PSX) will remain attached their sentiments to the loan program under International Monetary Fund (IMF).

Analysts at Arif Habib Limited said that it seems that the IMF deal is dependent on funding from “friendly countries” to cover a balance of payments gap. Once this funding is secured, the IMF program can move forward and this will have a positive impact on the stock market sentiment.

READ MORE: Pakistan stocks plummet by 434 points on negative sentiments

The statement suggests that the availability of external funding to support the economy is an important factor in the market’s confidence and outlook.

The benchmark KSE-100 index of Pakistan Stock Exchange (PSX) is currently undervalued compared to the Asia Pac regional average.

The price-to-earnings ratio (PER) of 3.7x in 2023 is much lower than the regional average of 11.4x, indicating that the stocks in the PSX are relatively cheaper.

Additionally, the dividend yield of 11.4 per cent is much higher than the regional average of 3.1 per cent, making the PSX more attractive to investors looking for income.

READ MORE: Pakistan stocks shed 40 points in range bound trading

However, it’s important to keep in mind that the PER and dividend yield alone don’t necessarily indicate the quality or growth potential of the underlying companies in the index.

The outgoing week saw a decline in the Pakistan Stock Exchange (PSX) due to uncertainty surrounding the resumption of the International Monetary Fund (IMF) program.

The government’s announcement of a subsidy scheme without consulting the IMF could cause further delays in unlocking the next tranche. This led to the Pakistani Rupee depreciating against the US dollar by PKR 1.41 or 0.53 per cent WoW.

The Sensitive Price Index (SPI) also saw a record increase of 45.64 per cent due to rising prices of essential commodities. On the political front, the Punjab elections, originally scheduled for April 30, were postponed until October 8 by the Election Commission of Pakistan.

READ MORE: KSE-100 index begins week with decline of 412 points

The government raised PKR 1.14 trillion through MTBs, with yields for 3M and 6M increasing by over 100bps, potentially signaling another rate hike in the next Monetary Policy Committee (MPC).

However, Pakistan’s current account deficit (CAD) for July-Feb of FY23 decreased by 68 per cent compared to the same period last year, standing at $3.86 billion. The PSX closed the week at 39,942 points, down 1,388 points (3.36 per cent) WoW.

According to the report, the sectors that negatively contributed to the market were miscellaneous, cement, E&Ps, fertilizer, and banks. Miscellaneous sector had the highest negative contribution of 210 points, followed by cement sector with 191 points, E&Ps sector with 186 points, fertilizer sector with 180 points, and banks sector with 173 points.

READ MORE: Weekly Review: investors to hope for successful IMF program

On the other hand, only two sectors had a positive contribution, which were leather & tanneries with 5 points and modarabas with 2 points. Among individual stocks, PSEL had the highest negative contribution of 211 points, followed by OGDC with 87 points, PPL with 79 points, EFERT with 68 points, and ENGRO with 61 points. On the positive side, SRVI had a contribution of 5 points, followed by RMPL with 4 points, and MTL with 3 points.

Foreigners buying was witnessed during this week, clocking in at $0.5mn compared to a net sell of $5.0 million last week. Major buying was witnessed in E&P’s ($0.5 million) and Technology and Communication ($0.3 million). On the local front, selling was reported by Insurance companies ($0.7 million) followed by Individuals ($0.6 million).

Average volumes arrived at 133 million shares (down by 40 per cent WoW) while average value traded settled at $12.7 million (down by 56 per cent WoW).