Geopolitics, inflation numbers key as Pakistan equities look to rebound next week

The movement of the Pakistan Stock Exchange (PSX) in the next week is likely to be influenced by the geopolitical situation, while lower-than-expected inflation numbers and any good corporate results might also help keep sentiments boosted.

"We foresee the momentum in the KSE-100 to continue given successful staff-level agreement of the IMF’s second review, minimal flood impact and improved credit ratings by global agencies amid falling fixed income yields", said an analyst from AKD Securities.

Investor sentiment is expected to further improve on the likelihood of foreign portfolio and direct investment flows, driven by improved relations with the US and Saudi Arabia.

He said that this outlook is supported by the lack of alternative investment avenues and the attractive valuation of local equities, with the KSE-100 trading at a multiple of 7.4x while offering a dividend yield of 6.6%

During the outgoing week, the benchmark KSE-100 Index extended its losing streak, shedding 1,673 points to close at 161,632. The market sentiment remained subdued as investors reacted cautiously to news of potential fiscal tightening and a lack of fresh positive triggers.

Selling pressure persisted across key sectors, particularly in banking and cement, as participants stayed on the sidelines amid uncertainty about future economic measures.

Average daily traded volumes dropped sharply to 953 million shares, down from 1,482 million in the previous week, reflecting a 36% decline from last week's levels as overall participation thinned amid profit-taking and risk aversion.

The KSE-100 Index remained under pressure during the week, falling to a low of 156,732 points amid geopolitical tensions following the failure of Pakistan-Afghanistan talks in Istanbul on cross-border militancy.

However, the index rebounded sharply on Friday after both countries agreed to maintain a ceasefire, with further discussions scheduled for November 6.

An analyst from Arif Habib Ltd. said the inflation numbers expected on Monday could be a trigger for the market, as they will be key to determining future monetary policy and regulating investor sentiment.

Overall, we expect the market to remain range-bound in the coming week, barring any external triggers, he added.