Pakistan bourse likely to perform well

KARACHI: The Pakistan stocks witnessed a lacklustre and volatile week ended January 14, 2022 and closed 0.92 per cent up, while the analysts believe the index will perform well, going forward.

“The passage of the mini-budget should address the fiscal concerns, while the revival of EFF facility with the IMF will not only allow resumption of multilateral flows of the international financial institutions (IFIs), easing pressure on the balance of payments position, it will also bring discipline on the part of the government towards macro-prudential measures,” Khawaja Waheed, CEO of NBP Funds, said.

The Pakistan Stock Exchange KSE-100 shares Index gained 0.92 per cent, or 417.8 points, to close at 45,763.45 points. The KSE-30 shares index gained 0.56 per cent, or 100.12 points, to close at 17,998.51 points.

Neelam Naz at JS Global Capital said: “The bourse remained under pressure throughout the week due to the lack of positive triggers, while investors opted for profit-taking across-the-board.”

From the fundamental perspective, the market is trading at an attractive Price-to-Earnings (P/E) multiple of 5.7x, versus 10-year average of 8.2x. The market also offers a healthy 5.8 per cent dividend yield.

“Taken together, we advise investors with medium- to long-term horizon to build position in the stock market through our NBP stock funds.”

For 2022, the economic recovery continues to gain momentum, as reflected in most high-frequency indicators such as automobile sales, petroleum products sales, and electricity generation, etc.

However, the main concern is the challenge in the form of elevated current account deficit and inflationary pressure due to the commodity up-cycle and higher aggregate demand.

The government and the central bank have been very proactive this time to bring stability and preserve growth. Several policy measures by the central bank that include steep hike in the discount rate, higher Cash Reserve Requirement (CRR) of the banks attempt to cool down domestic demand that will help arrest the current account deficit and ease off inflationary pressures, going forward.

In addition to the steep currency depreciation, enhanced scope of cash margin on imports, increase in duties and restricting import of non-essential items will also help.

During the week, car sales clocked-in at 32,000 units for December 2021, up 33 per cent MoM; mini-budget and SBP autonomy bill, both the IMF programme prior action, were passed through the National Assembly, while the prices of key petroleum products are estimated to jump up to Rs6.30 per litre on January 15, 2022 for the next fortnight, mainly because of higher international oil prices.

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