Stock Market
Strong economic indicators, coupled with optimism that interest rate cut would be announced next month, stirred up optimism across the stock market last week. Some selling pressure from foreign investors notwithstanding, the benchmark index scaled a closing high, touching almost 86,000 points.
Arif Habib Ltd said in its weekly report that the market was very resilient as the KSE-100 closed with a high of 85,669 points on Wednesday. The key among these stocks were Oil and Gas Development Company (OGDCL) and Pakistan Petroleum Ltd (PPL), which were doing well due to their strong earnings announcements for Q4FY24. Such entities had clocked almost 100 percent cash sales in the fourth quarter of FY24, besides not making circular debt anymore. That certainly helped its investors’ case.
However, that was more than countered by positive data on the broader economic front. Remittances in Pakistan increased significantly to reach $8.8 billion in the first quarter of FY25 – 39 percent higher than a year earlier. This is good news for the country’s improving economic fundamentals.
In addition, the government’s pro-active measures included purchasing Treasury bills of Rs475 billion, while simultaneously witnessing its net investments through the Roshan Digital Account touch a noteworthy $1.532 billion. These measures reflect the attempts made by the government in trying to stabilize the financial landscape while fostering investments through such innovative channels.
Automobile also reported a high-growth story with sales, which grew 27,600 units in the first quarter of FY25. The year-over-year growth was around 31 percent. Again, this reflects consumer demand, wherein most factors like favorable economic conditions and liquidity adequacy are improving market conditions.
State Bank Pakistan’s foreign exchange reserves witnessed a month-on-month high since April 2022, reaching $10.8 billion, $106 million higher than the previous week. Once again, this is a positive development because it increases the country’s ability to cope with external financial obligations and provides a cushion against global economic uncertainties.
However, the rupee faced slight pressure after weakening by 12 paise to settle at Rs277.5 against the US dollar. Still, with these indicators, the overall economic indicators remain positive and quite stable in the currency market.
The benchmark KSE-100 index closed at 85,483.40 points, up by 1,951 points or 2.34 percent over the week. The market’s positive momentum was largely driven by a shift in liquidity toward equities as local investors reallocated funds from fixed-income assets due to their expectation of an easing of interest rates, said AKD Securities Ltd.
Investor confidence got another fillip when the Saudi delegation visited, and this resulted in 27 MoUs worth $2.2 billion. MoUs also discussed acquiring a percentage share in the Reko Diq mining project, an important deal for Pakistan’s mining industry.
A lot was achieved in the energy sector when the government canceled Power Purchase Agreements with five Independent Power Producers. There are consultations with 17 others on changing their existing system, which is “take-or-pay,” to a “take-and-pay” system that will better rationalize energy pricing towards efficiency, and consequently, reduce the financial burden on the economy.
The trade deficit for September stood at $1.78 billion, although the overall position of the current account is expected to be stable, as analysts say it might develop into a surplus coming period. The stability is being regarded as maintaining investor confidence and in support of the further uptrend in the stock market.
Diminishing interest rates and positive economic indicators will keep the momentum going for AKD Securities Ltd as it expects the upward movement in the stock market to continue even at its high point. The price-to-earnings ratio and dividend yield stand at 3.7x and 12.7 percent, respectively, which is hugely promising with so much chance of getting good returns.
With the government taking one more step forward with reforms and the economy getting better and better, market analysts expect this rally to continue in the near term. Prime focuses would be on sectors that would benefit from changes in policies, foreign investment, and increasing liquidity.
Conclusion: The stock market’s recent behavior exhibits an optimistic economic sentiment because of good data and strategic actions the government is taking. Under such conditions, it is likely to continue to be promising for investors targeting long-term equity market gains.
To Read More: Finance