Pakistan equity market betting on larger interest rate on December 16

Pakistan equity market investors would be mostly betting around monetary policy decision where any outcome above 200 bps could build a new wave of bullish spree where continuous buying from mutual funds to help new historic highs.

Saad Hanif, head of research at Ismail Iqbal Securities said that the trend at market will depend two major happenings- monetary policy on Dec 16 and Current Account numbers on Dec 18.

He said that after observing the secondary market yields the cut has already been incorporated in the market where rate cut might be in the range of 200-250 basis points.

He said much would depend upon the SBP statement and analyst briefing from the governor after announcement of monetary policy on inflation trend going forward.

Moreover, there has been an observation that from March or April inflation is likely to reverse and might land in double digit close column. So perhaps the next week cut would be the last one and in January interest rate will see smaller cut.

Saad said that current account would likely to be in surplus once again as there has been sustained inflows from external sources.

Ali Nawaz CEO Chase Securities said that the market has been flushed with liquidity and it is expected to continue as investors in mutual funds are converting their fixed income funds into equity funds.

The rally he said to remain strong as on Monday the State Bank of Pakistan to announce monetary policy where market expectations has been a possible cut of 200 to 300 bps.

Ali Nawaz hopes the cut to bring another wave of buying spree from mutual funds to help market show new highs.

Salman Ahmad head of institutional sales at Aba Ali Habib said that the major happenings next week, which will anchor the market trends has been the monetary policy announcement.

The general expectation has been 200 basis points which has already been factored, if less it will dent the prices, however below 2 percent is remote possibility.

The announcement if comes around 250 basis points, index will make new highs.

Investors will check upon the development on the IMF front as well where positive vibes can consolidate gains.

The report index during the preceding week made a new highs of 115,000 points but saw some adjustments but still on week on week basis showed rise of 4.8%.

He said gains made was due to stability in currency rate, higher remittances inflows, steady increase in foreign exchange reserves and approvals of two loans from Asian Development Bank.

He said current account numbers if arrives in surplus for November will help consolidate gains.

Salman added that heavy institutional buying specially from mutual funds, due to declining interest rates are compelled them to shift their investment from fixed income to equity market

An analyst from Arif Habib said that the market participants are expected to closely monitor the MPC meeting on 16th Dec’24 (which will mark the final MPC of CY24). "We project a 200bps cut in the monetary policy rate, arriving at 13%. Hence, the KSE-100 index is expected to continue with the bullish streak", he said.

The KSE-100 is currently trading at a PER of 6.1x (2025) compared to its 10-year average of 8.3x offering a dividend yield of ~7.9% compared to its 10-year average of ~6.4%.

The market closed at 114,302 points, significant up by 5,248 points or 4.8% during the past week.

With this, Pakistan continues to be the World’s best performing market in terms of US based return for the second consecutive week.

Sector-wise positive contributions came from i) Oil & Gas Exploration gained 3,175 points, Fertilizer up by 1,767 points, Oil & Gas Companies up by 589 points, Cement 432 points and Technology & Communication 403 points.

Foreigner selling continued during this week clocked in at $0.9 million compared to a net sell of $14.2 million last week.

On the local front, buying was reported by Funds amounting to $40.9 million.

Average volumes arrived at 1,362 million shares down by 19.1% compared with last week while the average value traded settled at $218 million, up 10.2% from the preceding week.