The stock market is poised to sustain its positive trajectory in the coming week, supported by an improving macroeconomic environment.
Analysts at Arif Habib Limited predict that the decline in Pakistan Investment Bond (PIB) yields has once again positioned equities as a favorable investment choice. With valuations currently at historically low levels, sentiment is expected to remain buoyant, leading to sustained stock market gains.
A renewed interest from foreign investors in the stock market is also bolstering confidence. This influx of foreign capital is expected to further fuel positive market activity, creating an optimistic outlook for traders and investors alike.
The benchmark KSE-100 index is currently trading at a price-to-earnings ratio (PER) of 5.6x, significantly lower than the Asia-Pacific regional average of 13.1x. Moreover, the stock market is offering an attractive dividend yield of approximately 9.6 percent, far surpassing the regional average of 2.5 percent.
The stock market began this week on a strong note, primarily driven by gains in the Exploration & Production (E&P) sector. A surge in global oil prices following strikes on two major Saudi oil facilities contributed to the sector’s performance. Additionally, the Monetary Policy Statement (MPS) on Monday revealed that the State Bank of Pakistan (SBP) decided to maintain the policy rate at 13.25 percent.
The week’s positivity was further supported by a successful PIB auction, where cut-off yields experienced a significant decline (3-year: -130 basis points, 5-year: -105 basis points, 10-year: -90 basis points). The resulting reduction in yields strengthened investor optimism, with expectations of a potential rate cut gaining momentum.
The KSE-100 index closed at 32,111 points, posting a weekly gain of 630 points. Sector-wise contributions to the stock market rally included Oil & Gas Exploration Companies (+204 points), Commercial Banks (+147 points), Fertilizers (+98 points), Oil & Gas Marketing Companies (+89 points), and Pharmaceuticals (+56 points).
Foreign investors showed heightened interest in the stock market, recording net buying of USD 7.75 million compared to USD 1.01 million in the previous week. Key buying was observed in Commercial Banks (USD 3.6 million) and Cement (USD 2.0 million), while domestic investors, particularly insurance companies and mutual funds, engaged in selling activity.
Despite a 5 percent weekly decline in average volumes (123 million shares) and a 13 percent drop in average value traded (USD 33 million), the stock market remains well-positioned for sustained growth in the near term.