PSX ends week with 5.6% gain, rate cut hopes could further bolster sentiment: report

The Pakistan Stock Exchange (PSX) ended the week on a high note with a net gain of 5.6% WoW, and it is expected to remain positive, with the primary focus on the upcoming Monetary Policy Committee (MPC) meeting where the hopes of a rate cut could further boost the investor sentiment. 

According to Weekly Review by AKD Securities, the KSE-100 index reached its highest-ever closing, just shy of the 90,000 mark, closing at 89,993.96 points, up by 5.6% week-over-week (WoW). This marked the highest weekly return in 27 weeks and the 47th highest weekly return since the index’s inception. 

More importantly, the KSE30 index (price index) also reached an all-time high at 28,395 points. 

The week started with positive momentum buoyed by the settlement of political noise following the passage of the stalled 26th Constitutional Amendment. Additionally, optimism extended with a swing in corporate result announcements and favourable economic developments. 

The rally was broad-based, with 80 out of 100 companies delivering positive returns. Leading sectors were Fertilizer, Cement, and Banks, contributing 1,312, 929, and 847 points to the index, respectively, primarily due to strong annual growth in company results. 

On the macro front, the current account posted a surplus for the second consecutive month at US$115mn in September 2024.  The SBP-held reserves increased by $18 million WoW, standing at $11.0 billion as of October 18, 2024.

Market participation also improved significantly, with average daily traded volume rising by 23% WoW to 532 million shares from 432 million shares in the previous week. 

On the currency front, the PkR remained flat against the greenback, closing the week at 277.6 against the US dollar. 

Key developments in the week included a 42% year-on-year surge in IT exports for September 2024, a 19% increase in banking sector deposits reaching PKR 31.3 trillion, a rise in sales tax on tractors from 10% to 14%, a 4.9% growth in loans to the private sector totaling PKR 8.4 trillion, and the approval of KE’s generation tariff with significant adjustments by Nepra. 

In terms of sector performance, Cement, Refinery, and Mutual Funds led with gains of 18.3%, 9.4%, and 8.7% week-over-week, respectively. 

Conversely, Modarabas, Textile composites, and Vanaspati & allied industries saw declines of 12.0%, 9.5%, and 5.0%, respectively. Foreign investors were net sellers, offloading $16.4 million, while Mutual Funds and other organizations were net buyers, purchasing $12.1 million and $8.3 million worth of shares, respectively. 

Leading companies for the week included KOHC, which rose 30.1%, CHCC up 29.8%, AICL gaining 26.4%, KEL increasing by 23.5%, and ATRL up 21.1%. 

On the downside, ILP, PIBTL, LOTCHEM, IBFL, and NESTLE were the main laggards, dropping 13.3%, 11.0%, 5.3%, 3.7%, and 3.4% week-over-week, respectively.

The brokerage firm forecasted that the market is expected to remain positive, with the primary focus on the upcoming MPC meeting, where an anticipated rate cut could further bolster market momentum. 

Despite the recent rally, valuations remain attractive, with the market trading at a P/E of 4.0x and offering a dividend yield of 11.2%.