Declining external financing needs under the IMF program, continuation of monetary easing, and improving the macroeconomics will keep foreigners’ interest alive in equities amid an increase of 3.6% WoW, according to brokerage firm AKD Securities.
The market remained volatile throughout the week ended on November 29, 2024. The volatility stemmed from an acceleration in political instability amid the PTI reaching to protest in Islamabad, creating uncertainty amongst investors, and leading to a major fall in the KSE-100 index, marking a decrease of 3,506 points on Tuesday.
However, the market regained its momentum on Wednesday after the protestors started to back off from Islamabad and the momentum was further fueled by a circular from the SBP, removing the MDR requirements on deposits held by commercial banks of financial institutions and public sector enterprises.
This led to the KSE-100 index registering its highest-ever intra-day gains of 4,695 points on Wednesday, and closing at a record high of 101,357 points, marking an increase of 3.6% WoW.
Major contributing sectors to this rally were commercial banks, contributing 1,675 points, followed by Technology & Communication with 349 points, and Oil & Gas Exploration, which added 283 points during the week.
However, another circular from the SBP revised its guidelines for profit sharing on saving deposits for Islamic Banking Institutions (IBIs), which resulted in Meezan Bank Limited (MEBL) eroding 439 points during the week.
Secondary market yields on the 6-month bill decreased to 12.12%, dropping to the lowest levels seen in over 2.5 years.
SBP held forex reserves increased by $131 million WoW, ending the week at $11.4 billion as of Nov 22nd, 2024. Moreover, Average Daily Trading Volume (ADTV) remained higher, up by 39.8% WoW, clocking in at 1.4 billion shares, compared to 990.7 million shares traded in the earlier week.
On the currency front, the Pakistani rupee witnessed a meagre depreciation of 0.1% against the greenback throughout the week, closing the week at Rs 278.05 against the US dollar.
Key developments during the week included the State Bank of Pakistan (SBP) receiving $500 million from the Asian Development Bank (ADB) under the climate resilience program, the IT Ministry drafting an incentive plan for the semiconductor industry, the signing of eight memorandums of understanding (MoUs) to strengthen ties between Pakistan and Belarus, and the government forming a committee for the Reko Diq deal.
Sector-wise, property, leather and tanneries, oil and gas marketing companies, technology and communication, and exchange-traded funds emerged as the top performers, with week-on-week increases of 18.5%, 13.4%, 9.7%, 8.2%, and 5.5%, respectively.
Conversely, sectors such as jute, woollen, transport, automobile assemblers, and investment companies faced declines of 13.0%, 2.2%, 1.9%, 0.5%, and 0.4% week-on-week, respectively.
In terms of trading flows, foreign investors recorded net selling of $15.1 million, while insurance companies absorbed most of the sell-off with a net purchase of $10.6 million.
Among individual companies, top performers included Bank of Punjab (up 36.6%), Askari Bank Limited (up 27.7%), Habib Bank Limited (up 25.1%), JVDC (up 23.7%), and MEHT (up 20.7%). Meanwhile, lagging performers were Meezan Bank Limited (down 11.7%), First Al-Noor Modaraba (down 8.8%), PSEL (down 7.8%), SAZEW (down 4.7%), and GHGL (down 3.2%).
AKD Securities forecasted that continuation of monetary easing due to the disinflationary environment and improving macroeconomic environment would make investment in equities more appealing, given the current price-to-earnings ratio of 4.9x and a dividend yield of 10.2%.
The aforementioned factors, along with declining external financing requirements under the IMF program, would keep foreigners’ interests alive.
AKD Securities recommended focusing on sectors benefiting from monetary easing and structural reforms while cautioning that modest economic recovery may limit gains for cyclical stocks. Top picks for investment include OGDC, PPL, MCB, FFC, PSO, LUCK, MLCF, FCCL, and INDU.
