PSX benchmark index up 7.6%WoW

Pakistan Stock Exchange (PSX) continued its bullish momentum throughout the week, leading to a major increase in the benchmark index, registering its highest ever weekly point gains of 7,697 and market closed at a record high of 109,054 points, up 7.6%WoW on Friday, December 06, 2024.

The bullish momentum was fueled by November 2024 inflation recorded at 4.9%YoY, lowest in nearly six and half years, fueling expectations for continued monetary easing in the upcoming Monetary Policy Committee scheduled for December 16, 2024.

Major contributing sectors to this rally were commercial banks, followed by Fertilizer, and Oil & Gas Exploration. Interest in the banking sector continued to rise, with gross advances increasing by 21%YoY as of November 15, 2024, taking the ADR to 46.9%, with expectations of crossing the 50% threshold before the year-end to avoid ADR-based taxation.

Meanwhile, fertilizer sector advanced on ENGRO’s agreement to acquire the Jazz Tower business, coupled with the Lahore High Court’s approval of the FFC-FFBL merger.

Saudi Fund extends term of US$3 billion deposits for another year.

Trade deficit for November 2024 was reported at US$1.6 billion, down 19%YoY.

Total debt dropped by 1%MoM to PKR69 trillion in October 2024.

Foreign exchange reserves held by State Bank of Pakistan (SBP) increased by US$620 million, following a US$500 million loan disbursement from the Asian Development Bank (ADB), taking total reserves held by SBP to US$12.0 billion as of November 29, 2024.

Market participation increased by 21.5%WoW to 1.7 billion shares, as compared to 1.4 billion shares traded in the earlier week.

PKR remained stable against the greenback, closing the week at PKR278.01 to a US$.

Other major news flow during the week included: 1) Saudi crown prince accepted invitation to visit Pakistan, 2) Oil sales surged to 25-month high, 3) Cement dispatches increased 5.58%YoY, 4) FBR decided to put more curbs on FATA/PATA steel sector and 5) Prime Minister hinted towards cut in policy rate.

Vanaspati & Allied Products, Transport, Refinery, Cable & Electrical goods and Engineering were amongst the top performing sectors.

Major selling was recorded by Individuals, Insurance companies, and foreigners with a net sell of US$26.0 million, US$21.0 million, and US$14.2 million, respectively. Mutual funds and companies absorbed most of the selling with a net buy of US$44.0 million and US$10.7 million, respectively.

Top performing scrips of the week were: CNERGY, Airlink, PABC, NML, and PAEL, while laggards included: EFUG, JVDC, HBL, AKBL, and PSEL.

Continuation of monetary easing due to disinflationary environment and improving macroeconomic environment would make investment in equities more appealing, currently trading at P/E of 5.0x and DY of 10.2%.

Moving forward, upcoming MPC meeting would remain in investor’s focus, also keeping cyclical sector attractive.

Aforementioned factors, along with declining external financing requirement under the IMF program, would keep foreigners’ interest alive.

Top picks of AKD Securities include: OGDC, PPL, MCB, FFC, PSO, LUCK, MLCF, FCCL and INDU.

 

 

 

PSX benchmark index closes at record high

Pakistan Stock Exchange (PSX) maintained its bullish momentum throughout the week ended on November 15, 2024, with the benchmark index closing at a record high 94,763 points, marking a 1.6%WoW increase, achieving its highest-ever closing.

The bullish momentum continues on the back of accelerated pace of monetary easing by State Bank of Pakistan (SBP) and IMF’s visit with a focus on structural reforms.

During the visit, the IMF mission held discussions with local authorities, focusing on the external financing gap and the Federal Board of Revenue (FBR) revenue collections. FBR officials assured the IMF that the revenue target would remain unchanged, attributing the shortfall in revenue collection during the first four months of FY25 to inaccurate economic assumptions, particularly regarding GDP growth, imports, and inflation.

Both the sides discussed short-term as well as long-term measures to address the potential revenue shortfall, including raising taxes on sugary drinks and the import of machinery and raw materials.

In the latest T-Bills auctions, the SBP raised PKR776 billion, with bulk of the participation confined to 3-month tenor. The yield on the 3-month bill decreased by 20bps, while the yield on the 12-month bill increased by 10bps.

Auto sector sales for October 2024 was reported at 15,192 units, up 31%YoY.

Foreign exchange reserves held by SBP increased by US$84 million WoW, ending the week at US$11.2 billion as of November 08, 2024.

Average daily traded volume rose by 19.6%WoW to 878.5 million shares, from 734.6 million shares traded a week ago.

PKR largely remained stable against the greenback throughout the week.

Other major news flow during the week included: 1) Gop awaits IMF stance on mini-budget, 2) Solarization plunging power demand upsets IMF, 3) APM Terminals commits to invest in Pakistan, 4) Finance Minister invites Turkish firms for JVs and 5) Russia expresses interest in working with Pakistan on North-South Trade Corridor (NSTC).

Transport, Woollen, Pharmaceuticals, Vanaspati & Allied industries and Glass & Ceramics were amongst the top performing sectors, while Jute, Mutual Funds, Automobile Assembler, Fertilizer & Engineering were the laggards.

Major net selling was recorded by Companies with a net sell of US$11.0 million, while Mutual Funds absorbed most of the selling with a net buy of US$13.9 million.

Top performing scrips of the week were: Searl, EFUG, BNWN, TRG, and ABOT, while laggards included: FCEPL, THALL, MLCF, MUGHAL, and KOSM.

Continuation of monetary easing and improving macroeconomic environment would make investment in equities more appealing, currently trading at P/E of 4.2x and DY of 10.8%.

Aforementioned factors, along with declining external financing requirement under the IMF program, would keep foreigners’ interest alive. We recommend sectors that benefit from monetary easing and structural reforms.

However, modest economic recovery may limit the upside for cyclicals. Top picks of AKD Securities include, OGDC, PPL, MCB, MEBL, FFC, PSO, LUCK, MLCF, FCCL and INDU.

 

Pakistan stock market up 3% in 3Q2024

According to Pakistan’s leading brokerage house, topline Securities, the benchmark KSE-100 index has posted 3.4%QoQ in rupee and 3.7% in US dollar terms in 3Q2024, marking the sixth consecutive quarter in positive trajectory.

Continuation of positive momentum is attributed to: 1) firstly the completion of staff level agreement with IMF at start of 3Q2024, 2) IMF board approval and disbursement of first tranche to State Bank of Pakistan (SBP) at the end of quarter, 3) Inflation entering single digits for the first time since October 2021, 4) reduction in policy rate by 300bps to 17.5%, 5) improvement in country’s credit rating according to major credit rating agencies Moody’s and Fitch, 6) better than expected current account number, which entered surplus in August, and 7) stability in currency amidst strong dollar inflows.

As per Bloomberg data, Pakistan market remained 4th best performer in 2Q2024 with total US$ return of 17% However in 3Q2024 the ranking stood at 66 in World Equity Index.

The continuation of positive momentum in stock market has been accompanied by healthy trading activity with average daily traded volumes in the Cash and Ready market increased by 74%YoY to 490 million shares. The average traded value also jumped by 86%YoY to PKR18 billion/ day during 3Q20204.

The average volumes in the Futures market also increased by 61%YoY and by 8%QoQ to 172 million shares/ day. The average traded value of the same increased by 57%YoY and by 4%QoQ to PKR7.2 billion/ day. Increase on a QoQ basis is due to lower interest rates in 3Q2024.

During 3Q2024, foreigners emerged net sellers of PKR4.68 billion (US$16.8 million) as against net buyers of PKR18.3 billion (US$65.8 million) in 2Q2024. Reversal of positive trend was due to FTSE rebalancing related foreign selling during the quarter which is expected to trail off into 4Q2024 as well.

Investor concerns regarding FTSE rebalancing related selling were mitigated by selling being absorbed by both local and foreign investors and the market maintaining its positive momentum.

On the local front, mutual funds were major buyers with net buy of US$14.2 million followed by Banks and DFIs with net buy of US$7.5 million. Individuals were the biggest net buyers to the tune of US$45.8 million. However, Insurance and Companies remained sellers of US$15.5 million and US$15.5 million respectively in the quarter under review.

The key scrips of KSE-100 index that outperformed market in 3Q2024 included National Bank (NBP) up 62%, Mari Petroleum (MARI) up 44%, and Fauji Fertilizer (FFC) up 42%.

Key sectors that outperformed market during the quarter included Jute, Pharmaceuticals and Transport.

Market outlook

State Bank of Pakistan (SBP) in its last Monetary Policy Committee (MPC) held on September 12, 2024, decided to reduce the policy rate by 200bps to 17.5%. This was the third consecutive rate cut announced by central bank in response to receding inflation readings in past few months due to high base effect, falling food prices and comfortable external position.

Interest rate: The Committee noted that the pace of disinflation has exceeded committee’s earlier expectations due to delay in implementation of planned increases in administered energy prices and favorable movement in global oil and food prices. Since inflation is expected to remain in single digit in next quarter, further policy rate cut cannot be ruled out.

Rating Revision: IMF’s executive board approved Pakistan’s US$7 billion Extended Fund Facility (EFF) on September 25, 2024. Following this approval, an upgrade of Pakistan’s rating by international agencies like Moody’s, Fitch, and S&P cannot be ruled out.

MSCI Inflows: MSCI Semi-Annual Index Review is scheduled for Nov 07, 2024 where we are expecting further increase in weight of Pakistan due to continued bull-run of market.

Commodity Prices: Outlook of Pakistan's economy will also be dependent upon commodity prices going forward. Brent oil prices have declined from average of US$85/bbl in 2Q2024 to US$79/bbl in 3Q2024. The petroleum group makes up a major portion of Pakistan’s imports and was 30% of total imports in 2MFY25.

 

Pakistan Stock Exchange benchmark index posts 3.02%WoW increase

Pakistan Stock Exchange (PSX) sustained its positive momentum and surged to record highs. The benchmark index closed at record high of 57,397 points on Thursday before posting a slight correction to close at 57,063 points on Friday, posting an impressive 3.02%WoW increase.

During the week investors remained focus on the IMF review, concluding with a successful staff-level agreement, paving way for a US$700 million inflow post-IMF Board approval.

A major but negative development was the government’s decision to impose a 40% tax on banks' windfall income, meeting IMF demands and to agree on further revision in the gas prices in January 2924.

There was a noteworthy increase in remittances, surging to US$2.21 billion. In addition, international oil prices experienced a considerable ease, attributed to increased US strategic reserves and reduced demand from China.

Market participation witnessed a substantial improvement, taking average daily trading volume to 687 million shares, registering a 26%WoW increase from earlier week's average of 544 million shares.

Notably, Thursday saw participation cross one million share mark for the first time in last 28 months.

On the currency front, the rupee appreciated marginally by 0.19%WoW against the greenback, closing at PKR286.5/US$ on Friday.

Other notable news of the week included: 1) MSCI keeping Pakistan’s Frontier Market Index unchanged, 2) Debt/ liabilities soaring to PKR78 trillion, 3) Bank deposits rising 18%YoY on high rates and currency crackdown, 4) Car sales plunging by 24%MoM in October, 5) UAE firms expressing intent to invest US$25 billion in real estate sector.

Close-end Mutual Funds, Synthetic & Rayon, and Woollen were amongst the top performing sectors. Vanaspati & Allied Industries, Commercial Banks, and Textile Weaving were amongst the laggards.

Major net selling was recorded by Banks with a net sell of US$9.14 million. Foreigners remained bullish with a net buy of US$8.22 million.

Top performing scrips during the week were: HGFA , PAEL, RMPL, IBFL, and PKGP, while top laggards included: BIPL, BAFL, CNERGY, PABC, and MEBL.

Despite the benchmark index reaching record highs, the market remains at attractive valuations.

Analysts maintain their positive outlook on the market owing to favorable economic developments like improving inflation and expected monetary easing in the current fiscal year.

While the market is flourishing, Analysts strongly advise market participants to avoid potential pitfalls and instead concentrate on companies with robust fundamentals.

Furthermore, companies with healthy dividend yields can be a prudent strategy for navigating inflation safely.

 

 

Pakistan Stock Exchange outperforms other global equity benchmarks WoW basis

Continuing the momentum gained in the latter part of last week, the benchmark index of Pakistan Stock Exchange (PSX) closed the week ended on 3rd April 2020 at 31,622 points, posting 12.5%WoW gain. It was the highest ever in points gain, (up 3,512 points WoW) and highest weekly gain in percentage terms since February 2000, outperforming other global equity benchmarks on weekly basis. Across the board attractive valuations, cabinet approval of the stimulus package announced last week and kick-start of essential industries in the coming week (another incentive package for Construction sector announced on Friday) aided investor sentiment in tandem with encouraging news flow regarding number of recoveries from coronavirus. For the week top gainers included: ASTL, CHCC, MLCF, PIOC and KAPCO.

As a result, average traded volume jumped to 227.7 million shares, from 150.0 million shares traded a week ago. Within main board items, Cements led the show, gaining 26.0%WoW on expectation of the construction sector incentive package and news flow suggesting initiation of construction activities at Diamer Bhasha dam. It was followed by E&Ps/OMCs gaining 15.7/23.2%WoW, on Brent price rising more than 30% in anticipation of deal between Saudi Arabia and Russia. Flow wise, net buyers were Individuals (US$13.0 million), Mutual Funds (US$10.3 million), and Insurance (US$9.0 million), mostly absorbing sale by foreigners (US$36.1 million).

On the international front, global institutional investors continue to sell despite undemanding valuations driven by redemption pressures across both active and passive investment strategies. At the same sovereign allocators of global capital are also calling in redemptions due to calls for support from respective governments to fund relief measures as economies face various levels of impacts due to the virus outbreak. A fresh round of allocations may only be likely over the medium to longer term as economies only gradually reopen within the backdrop of large scale stimulus programs launched by central banks. Stimulus programs will eventually translate into higher risk tolerance improving allocations towards frontier and emerging markets.

Analysts advocate buy-and-hold investment strategy with a long term investment horizon since the impact of coronavirus outbreak is yet to be completely gauged. They also suggest continuing to monitor data regarding the virus, testing capacity augmentation, provincial measures to mandate social distancing (including length and severity of lockdowns.