PSX Closes Week Just Shy Of 100,000 Mark – OpEd
Pakistan Stock Exchange (PSX) remained positive throughout the week ended on November 22, 2024. The benchmark index closing at a record high of 97,798 points on Friday, up 3,035 points or 3.2%WoW. During the last trading session, the index touched an intraday high of 99,630 points, just 377 points shy of the 100,000 mark.
The positive momentum was primarily driven by Banks and Fertilizer sector, which collectively contributed 2,839 points to the index. Rerating in these sectors continued, supported by their attractive dividend yields compared to fixed-income securities. Fertilizer sector’s performance was further boosted by the ongoing amalgamation of FFC with FFBL, with FFC emerging as the best performing scrip during the week.
Banks showed growth, with their lending gaining momentum, bringing the ADR to 44% as of October 25, 2024, as compared to 39% the earlier week, to avoid higher ADR-based taxation, as the GoP has appealed to the Supreme Court against the Islamabad High Court’s stay order on this tax. Furthermore, in the latest PIB auction, yields for 2, 5, and 10-year bonds declined to 13.05%, 12.50%, and 12.84%, respectively, marking their lowest levels since March 2022.
The conclusion of the IMF interim review and positive remarks alleviated concerns over a potential mini-budget and boosted investor confidence.
Current account balance for October 2024 posted a surplus of US$349 million, bringing the 4MFY25 cumulative surplus to US$218 million, as compared to a deficit of US$1.5 billion during the same period last year.
Market participation also improved, with average daily traded volume rising by 13%WoW to 991 million shares from 879 million shares in the earlier week.
Foreign exchange reserves held by State Bank of Pakistan (SBP) were reported at US$11.3 billion as of November 15, 2024.
Other major news flows during the week included: 1) Exports of textiles and clothing grew 10%YoY in 4MFY25, 2) Petroleum imports grew 1.68%YoY in four months, 3) Urea sales dropped 21%YoY, while DAP sales rose 95%YoY in October, 4) IT services export soar 35%YoY in October 2024.
Fertilizer, Pharmaceuticals, and Banks were amongst the top performing sectors, while Jute, Woollen, and leasing companies were amongst the laggards.
Major selling was recorded by Foreigners with a net sell of US$33.0 million. Companies and Mutual Funds absorbed most of the selling with a net buy of US$13.0 million and US$12.3 million, respectively.
Top performing scrips of the week were: PSEL, KAPCO, GLAXO, FFBL, and FFC, while laggards included: NCPL, HCAR, SEARL, TRG, and PKGP.
Market is expected to remain positive, driven by ongoing monetary easing amid a disinflationary environment and improving macroeconomic indicators. Investors are likely to focus on upcoming inflation figures and the decision of upcoming Monetary Policy Committee next month.
Declining fixed-income yields and strengthened macro fundamentals are expected to maintain equities as an attractive asset class, with the market currently trading at a PE of 4.5x and DY of 10.4%.
AKD Securities recommend focusing on sectors that stand to benefit from monetary easing and structural reforms.
Top picks of the brokerage house include: OGDC, PPL, MCB, UBL, MEBL, FFC, PSO, LUCK, MLCF, FCCL and INDU.
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