KARACHI: The key measure of stock prices surged on Monday to cross the psychological barrier of 48,000 points as investors reacted positively to the prospect of Saudi money flowing into Pakistan’s mineral and energy sectors.

Topline Securities Ltd CEO Mohammed Sohail said the expectation of investment from Saudi Arabia and the United Arab Emirates along with the Pakistan Mineral Summit, scheduled to be held on Aug 1, helped build investors’ confidence.

As a result, the KSE-100 index settled at 48,034.60 points, up 957.60 points or 2.03 per cent from the preceding session.

According to data compiled by Arif Habib Ltd, the KSE-100 index posted the highest return — points-wise — in July. The benchmark gained 6,582 points or 15.9pc on a month-on-month basis to surge past the 48,000 level, a threshold it crossed after two years.

The rally began at the end of June when the country reached a staff-level agreement with the International Monetary Fund (IMF) for a $3 billion Stand-By Arrangement.

“Better than expected IMF loan, timely compliance with IMF conditions, expected foreign investment from the Gulf countries and clarity on the upcoming elections have revived interest in Pakistan equities,” said Topline Securities in a strategy paper released on Monday.

However, in a separate research note issued over the weekend, JS Global Head of Research Amreen Soorani reminded investors that the index levels alone “do not portray the whole picture”. She drew a comparison between the stock market of today and that of November 2021 when the index level was also 47,000 points.

The KSE-100 is a total-return index and, therefore, incorporates dividends announced by the constituent companies. As a result, the 47,000-point of today doesn’t mean the stock prices have recovered to November 2021 levels, she said.

In fact, the KSE-100 index’s market capitalisation — which is the total value of shares — is currently 17pc lower than that in November 2021.

The comparison becomes even starker on the basis of the average price-to-earnings multiple, which measures a company’s current share price relative to its per-share income. Owing to consistent corporate profitability growth that’s not being reflected in stock prices, the average multiple is currently hovering around 3x versus 5.5x in November 2021, she said.

“The PSX offers material upside even in the case of just mean reversion. But macro – and political – clarity remains imperative in the market regaining its highs, not just in terms of symbolic index levels but also stock valuations,” she said.

The overall trading volume on Monday increased 8pc to 491.8 million shares. The traded value remained flat at Rs17.8bn on a day-on-day basis.

Stocks contributing significantly to the traded volume included WorldCall Telecom Ltd (49.3m shares), K-Electric Ltd (39.4m shares), Cnergyico PK Ltd (32.4m shares), Pakistan Petroleum Ltd (24.1m shares) and Oil and Gas Development Company Ltd (22.4m shares).

Companies registering the biggest increases in their share prices in absolute terms were Unilever Pakistan Foods Ltd (Rs1,050), Nestle Pakistan Ltd (Rs60), Mari Petroleum Company Ltd (Rs43.43), Al-Abbas Sugar Mills Ltd (Rs37) and Colgate-Palmolive Pakistan Ltd (Rs32.69).

Companies that recorded the biggest declines in their share prices in absolute terms were Sanofi-Aventis Pakistan Ltd (Rs30.40), Pakistan Services Ltd (Rs24.79), Pakistan Tobacco Company Ltd (Rs16.19), Abbott Laboratories Ltd (Rs14.79) and Bata Pakistan Ltd (Rs9.99).

Foreign investors were net buyers as they purchased shares worth $3.26m.

Published in Dawn, August 1st, 2023