The removal of ADR tax and implementation of additional
taxation resolved uncertainty over the taxation regime, fostered optimism as
banks would shift focus toward deposit growth.
Higher dividend expectations from fertilizer stocks and
ongoing restructuring further bolstered investors’ confidence.
On the macro front, inflation eased to a 7-year low of 4.1%,
taking real positive interest rates to 890bps, implying further potential rate
cut in the upcoming Monetary Policy Committee meeting. Statements from the
Finance Ministry and the Prime Minister hinting at interest rates dropping to
single digits further fueled this optimism.
A 14%YoY increase in imports widened the trade deficit to
US$2.4 billion at end December 2024. Meanwhile, 1QFY25 GDP growth stood at
0.9%, driven by Agriculture and Services sector growth of 1.2% and 1.4%,
respectively, while the Industrial sector contracted by 1.0%.
Prime Minister launched home-grown Economic Revival Plan
during the week, targeting GDP growth of 6% by FY28, boosting exports to US$60 billion,
and taking immediate measures to reduce electricity cost.
Market participation also improved significantly, with
average daily traded volume rising by 32%WoW to 1.04 billion shares from 0.79 billion
shares a week ago.
Foreign Exchange Reserves held by State Bank of Pakistan
(SBP) declined by US$143 million WoW to US$11.7 billion as of December 27,
2024.
Other major news flow during the week included: 1) FBR falls
PKR386 billion short of revenue target in first half of the current financial
year, 2) Sale of 15% stake in Reko Diq to be finalized soon, 3) OMC volumes for
the month of December were up 3%YoY while 1HFY25 volumes were up 4%YoY, 4)
Local cement sales decline 4.8%YoY in December, and 5) IMF refuses reduced
sales tax rates for refinery sector.
Engineering, Textile Spinning and Banks were amongst the top
performers, while Sugar & Allied and Tobacco sectors were laggards.
Major selling was recorded by Companies and Other organizations
with a net sell of US$11.3million and US$9.1 million, respectively. Mutual Fund
absorbed most of the selling with a net buy of US$16.9 million.
Top performing scrips of the week were: i) PGLC, PSX, EFERT,
DAWH, and MTL, while laggards included: TRG, FCCL, AICL, INDU, and PABC.
Market is expected to maintain its positive trajectory,
driven by an anticipated shift of funds from fixed income securities to
equities amid falling fixed income yields.
With easing inflation, the upcoming MPC meeting will remain
a key focus.
Over the medium term, the KSE-100 is anticipated to sustain
its upward momentum through CY25, where Pakistan’s leading brokerage house, AKD
Securities forecasts KSE-100 Index to reach 165,215 points by December 2025,
primarily driven by the strong profitability of fertilizer companies, higher
sustainable ROEs of banks and improving cash flows of E&Ps and OMCs,
benefitting from falling interest rates.
