In the latest week at the Pakistan Stock Exchange (PSX), investors are closely monitoring the progress of Pakistan’s ninth review of the International Monetary Fund (IMF) program, as it plays a significant role in their decision-making process.
Analysts at Arif Habib Limited emphasize the importance of the materialization of funds, along with commitments from other countries and financial institutions, to get the IMF program back on track.
Another key event drawing attention is the upcoming budget presentation scheduled for 9th June. Market observers are closely monitoring this event as well, as it can have a substantial impact on investor sentiment and market trends.
Currently, the benchmark KSE-100 index of the PSX is trading at a price-to-earnings ratio (PER) of 3.8x (2023), which is lower than the Asia Pacific regional average of 11.2x. Additionally, the index offers a dividend yield of 12.1 percent, surpassing the regional average of 3.0 percent. These favorable valuation metrics make Pakistani stocks potentially attractive to investors.
However, the market sentiment during the week remained predominantly negative due to uncertainties surrounding the resumption of the IMF program. Economic indicators released by the authorities showed a significant decline in GDP growth, with only 0.29 percent growth in FY23 compared to the previous year’s 6.1 percent growth.
Furthermore, the State Bank of Pakistan’s foreign exchange reserves experienced a decline of USD 119 million WoW, reaching USD 4.19 billion. The Pakistani Rupee (PKR) also depreciated against the US Dollar, closing the week at 285.15/USD, reflecting a decrease of PKR 0.67 (-0.23 percent) WoW. Overall, the market closed at 40,964 points, down by 635 points (-1.53 percent) WoW.
Sector-wise, negative contributions came from Commercial Banks, Oil & Gas Exploration Companies, Technology & Communication, Power, and Fertilizer. On the positive side, Food & Personal Care Products, Textile Composite, and Textile Spinning sectors made contributions.
Individual stocks that made negative contributions were HUBC, UBL, OGDC, PPL, and SYS. Conversely, NESTLE, ENGRO, UPFL, GATM, and COLG made positive contributions.
Foreign investors were net sellers during the week, with a total selling amount of USD 2.1 million. This is a shift from the previous week when they were net buyers of USD 0.6 million. Notably, major selling activities were witnessed in the Fertilizer and Technology & Communication sectors. On the local front, buying activities were reported by Banks and DFIs, followed by Individuals.
The average trading volume for the week stood at 118 million shares, representing a 10 percent decrease compared to the previous week. Meanwhile, the average value traded settled at USD 13 million, down by 2 percent WoW.
In summary, the stock market witnessed negative sentiment during the week due to uncertainties surrounding the IMF program and disappointing economic indicators. Investors continue to keep a close watch on the progress of the IMF loan program and the upcoming budget presentation. The attractive valuation metrics of Pakistani stocks compared to the regional average may continue to draw the attention of investors.