On the political front, forming a government at the centre via a coalition of major victorious political parties will keep the investor sentiment positive. Moreover, the government and SBP have fulfilled almost all the performance criteria for the final review of IMF’s Standby Arrangement Program, where a third tranche of USD 1.1bn will be disbursed in Apr’24 upon successful review. Additionally, investors will closely monitor the formation of the cabinet and the key portfolios. At the same time, the two major tasks for the new gov’t would be the negotiation of a new IMF program alongside the finalization of the FY25 budget.

We expect the inflation to decline during Mar’24 due to a high base effect. Nevertheless, it is important to recognize various risk factors that might affect these forecasts, such as: i) fluctuations in food prices (associated with Ramadan), ii) potential depreciation of the PKR against the USD, and iii) continuous rises in international oil prices.

The KSE-100 is currently trading at a PER of 4.2x (2024) as compared to its 5-year average of 5.9x offering a dividend yield of ~10.5% as compared to its 5-year average of ~7.7%. Our preferred stocks are OGDC, MARI, MCB, UBL, MEBL, FABL, HBL LUCK, MLCF, FCCL, FFC, HUBC, PSO and INDU.

Courtesy – AHL Research