KARACHI: The outlook for Pakistan’s stock market remains favorable, driven by expectations of continued monetary easing and improving macroeconomic environment.
“The deflationary environment, coupled with easing external financing requirements, makes the stock more attractive, especially with the market trading at a P/E of 5.0x and a DY of 10.2%,” analysts at AKD Research noted.
The KSE-100 index posted its highest weekly gain ever, rising 7,697 points to close at a record high of 109,054 points, up 7.6% on a weekly basis. These gains represent the highest weekly return in 4.7 years, supported by the November inflation rate of 4.9% year-on-year, the lowest in 6.5 years.
The main sectors leading the rise included commercial banks (+1434 points), fertilizers (+1424 points), and oil and gas exploration (+1148 points). The fertilizer sector rose following news of Engro Corporation’s acquisition of Jazz Tower and the Lahore High Court’s approval of the merger of FFC and FFBL.
AKD research highlighted that “continued interest in commercial banks is driven by a 21% year-on-year increase in gross advances as of mid-November, with ADR expected to exceed 50% by year-end to avoid ADR-based taxes.”
Source: PSX and AKD Research On the macroeconomic side, the Saudi Fund for Development extended $3 billion in deposits for another year, while November’s trade deficit narrowed to $1.6 billion, down 19% year-on-year. Government debt fell by 1% month-on-month to 69 trillion rupiah in October, and foreign exchange reserves increased by $620 million to $12 billion, supported by a $500 million loan from the Asian Development Bank.
Sector wise, Vanaspati and Allied Products (+23.7%), Transportation (+19.3%), and Refining (+18.5%) led the performance. Gainers included CNERGY (+45.6%) and Airlink (+42.5%), while laggards included EFUG (-8.8%) and JVDC (-8.1%).
The upcoming Monetary Policy Committee meeting on December 16 remains the main focus, with investors anticipating further easing to maintain momentum. Top stock picks include OGDC, PPL, MCB, FFC, PSO, LUCK, MLCF, FCCL, and INDU.