Mixed trade likely at PSX this week

Arif Habib Limited, KSE, PSX, NBFC, IMF, HBL, AKFED

KARACHI, (TLTP): After a rise of 1.59 percent by the benchmark index last week on the back of buyback of shares and the expected influx of funds from friendly countries and international creditors, mixed trade is likely at the Pakistan Stock Exchange (PSX) this week.

The PSX remained positive last week amid rupee’s slight appreciation against the US dollar, depleting foreign exchange reserves, domestic political turbulence and economic uncertainty, with the benchmark KSE-100 Index gaining 661 points (+1.59 percent) to close at 42,242 points. Among other indices, the KSE All Share Index closed at 27,876.27 points and KMI All Share Islamic Index closed at 20,208.75 points, making decent gains on a weekly basis.

The PSX closed in green in all the four sessions of the shortened week due to the Labour Day holiday on Monday. The bourse managed to close in green on Thursday despite massive profit-taking activity. Later on Friday, the market opened on a negative note and fell below the psychological level of 42,000 points. Though bulls brought the market back in the green, still the benchmark index failed to touch Thursday’s intraday high of 42,336.44 points. However, this negative bias can be countered with the fact that it was the last working day.

On the positive side, the market may be green in the week ahead as the buyback of shares from companies is still underway. The announcement of the buyback of shares by LUCK and HBL’s sponsor further boosted the sentiment. The Aga Khan Fund for Economic Development (AKFED) intends to purchase HBL shares. This positive sentiment is likely to be reinforced by developments related to disbursement and commitment of funds from friendly countries and international creditors, which will help bridge the financing gap and bring the IMF programme back on track. Moreover, a 40 percent decrease in trade deficit on a year-on-year basis may keep the momentum bullish also this week.

However, inflation that clocked in at 36.4 percent for the month of April on a year-on-year basis, fall in officials reserves of the country by $6 million on a week-on-week basis and political turmoil in the country may haunt the bourse. 

Similarly, foreign selling continued last week, clocking in at $6.1 million compared to a net sell of $14.2 million last week. On the local front, buying was reported by individuals and NBFC. Foreign buying is desperately needed to keep the bourse green.

According to a report of Arif Habib Limited, the benchmark KSE-100 index is currently trading at a PER of 3.9x (2023), which is lower than the Asia Pacific regional average of 12.2x. Additionally, the PSX offers a dividend yield of 11.5 percent, compared to 3.0 percent offered by the region, making it an attractive investment opportunity.

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