Pakistan stocks to stay bullish on anticipated strong financial results

Pakistan stocks are expected to continue their bull-run, driven by an anticipated shift of funds from fixed income to equities amid falling fixed income yields and a further 100 basis points cut in interest rates.

“With easing inflation, the upcoming Monetary Policy Committee meeting on January 27th will remain a key focus,” an analyst at AKD Securities noted.

During the week ended January 17, 2025, the KSE 100 Index gained 1.79% to 115,272.08 points, which can be accredited to a recovery after the market declined by around 3.7% in the previous week.

“Value investors came in to buy the dip and also contributed to a positive session on the last trading day of the week, following the conviction of the former Prime Minister on corruption charges,” an analyst at Topline Securities said.

Foreigner selling continued during the outgoing week, clocking in at $8.7 million compared to a net sell of $5.7 million the previous week. Major selling was witnessed in banks at $3.5 million.

On the economic front, positive developments provided some support. Key economic indicators showed improvement with December's current account posting a surplus of $582 million, bringing the total for the first half to $1.2 billion. In addition, the cut-off yields in the PIB auction dropped by 19-61bps.

Over the medium term, the KSE-100 is anticipated to sustain its upward momentum through CY25, with analysts foreseeing the KSE-100 Index reaching 165,215 points by December.

This thesis is primarily driven by the strong profitability of fertilizer companies, higher sustainable returns of banks, and improving cash flows of exploration and oil marketing companies, benefiting from falling interest rates.

An analyst from Spectrum Securities said that the overall sentencing of Imran Khan will not reduce political uncertainty, as PTI will continue with its international campaign, mostly in the US, UK, and European Union, to influence world leaders to release Khan from jail. Their lobbying efforts have already resulted in some voices being raised against Pakistan.

It is clear that the establishment and government are unwilling to release Imran Khan, and the verdict was announced before the start of Donald Trump's tenure as US President on January 20, 2025.

Now, the focus will shift towards how the US, or for that matter, how Donald Trump will respond to Imran Khan's sentencing.

Any strong reaction from the US President or US authorities, though unlikely, may cause some jitters in Pakistan. Following Imran Khan's sentencing, PTI may not launch political agitation inside Pakistan, but they would certainly hope for support from the new US administration of Donald Trump.

Going forward, analysts expect the market to maintain positive momentum in the coming week, supported by certain scrips trading at attractive valuations, which are likely to continue enticing investor interest.

Moreover, with the result season commencing next week, certain scrips are expected to be in light, driven by the expectation of strong financial results.

“The KSE-100 is currently trading at a PER of 6.1x (2025) compared to its 10-year average of 8.0x, offering a dividend yield of ~7.8% compared to its 10-year average of ~6.5%,” an analyst at Arif Habib Limited noted.