A review of meritorious PSX performance amid May 2024

During May-24: KSE-100 index gains 6.7% MoM

Index crossed 75k level, surging by 4,776 points MoM

KSE 100 witnessed a robust momentum throughout May’24, reaching an all-time high of 75,983 points.
At the onset of May’24, Saudi delegation arrived in Pakistan to discuss investment prospects in different sectors of Pakistan, which set the tone of positive momentum.
On the economic front, the headline inflation clocked in at 17.3% in Apr’24 compared to 20.7% in SPLY, which is expected to further decline in the upcoming months, paving the way for a potential cut in the policy rate in the upcoming MPC meeting.
In addition, optimism surrounding the potential negotiation of a new package of IMF also kept the sentiment intact.
Moreover, UAE has agreed to invest USD 10bn in Pakistan further boosting the overall sentiment.
The SBP reserves witnessed a decrease of USD 33mn, settling at USD 9.09bn.
Meanwhile, PKR remained stable at 278.33 against the USD.
Albeit, KSE-100 closed at 75,878 points, depicting a massive gain of 4,776 points | 6.7% MoM.

Major News

Urea sales in Pakistan hit 3-Year low due to seasonal impact, Sales of petroleum products fall by 6% in April, Cement Sales Slightly Down in April 2024, Togh-02 well in KP: OGDCL announces commencement of production, CCP launches phase 2 review of PTCL’s Telenor acquisition, Passenger auto sales dive 29%, Power generation in Pakistan falls nearly 14% YoY in April, Citi Pharma forms JV with China’s Hangzhou Newsea to boost API production, SLM to invest Rs30bn in expansion, OGDC further boosts Nashpa Well-10 output through optimization initiatives, Lucky TG to buy back its shares due to uncertain economic conditions, and Dewan Farooque Motors, EGML partner to make electric cars in Pakistan.

Outlook and Recommendations

Federal Budget FY25 is expected to be tabled on 10th June 2024, which holds key significance as it will provide a policy direction for the next year. Moreover, after the unveiling of the budget, certain sectors are expected to come into the limelight, which will determine the market’s direction. Alongside the budget, the government will also negotiate a long-term Extended Fund Facility with the IMF, boosting the market’s momentum. Moreover, the Monetary Policy Committee meeting is scheduled on 10th Jun’24, where a cut in policy rate could revive overall market sentiment, particularly in highly leveraged sectors. Meanwhile, any development related to the potential investments by friendly countries (such as Saudi Arabia and UAE) could provide a key trigger for the index.

Following a period of elevated levels in the twenties, headline inflation is currently on a downward trajectory and is expected to arrive at 13.0% in May’24. The last time inflation reached this range was in Mar’22, when headline inflation stood at 12.7% YoY. Going forward, we expect headline inflation to continue to de-escalate due to the higher base effect. However, the new budgetary measures coupled with the conditions set by the IMF for the new program, may influence future inflation trends.

The KSE-100 is currently trading at a PER of 4.3x (2025), compared to its 5-year average of 6.1x, offering a dividend yield of ~9.6%, compared to its 5-year average of ~7.3%. Our preferred stocks are OGDC, MCB, UBL, MEBL, FABL, HBL LUCK, MLCF, FCCL, FFC, HUBC, PSO, and SYS.

Courtesy – AHL Research