Stocks dull as late profit-taking drags down E&P rally

July 15, 2020

Stocks were dull on Tuesday as late profit-taking stole early thunder of the ongoing bull-run that has entered 13th day, while International Monetary Fund’s dismal growth outlook for this...

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Stocks were dull on Tuesday as late profit-taking stole early thunder of the ongoing bull-run that has entered 13th day, while International Monetary Fund’s (IMF) dismal growth outlook for this fiscal year weighed, dealers said.

Pakistan Stock Exchange’s (PSX) benchmark KSE-100 shares index gained 0.35 percent or 126.65 points to close at 36,745.22 points level, while KSE-30 ticked 0.17 percent or 26.77 points up to end at 15,927.82 points level.

Analyst Ahsan Mehanti from Arif Habib Corporation said, "Stocks closed higher amid speculations in the earnings season and Prime Minister’s housing initiatives for 5 percent bank lending portfolio allocation in FY20, supporting cement, steel, and banking scrips”. He said investor concerns over IMF’s (International Monetary Fund) lower projections on FY21 GDP growth at 1 percent, over 50 percent drop in car sales for June 2020, and plunge in global crude oil prices invited mid-session pressure. “Surging foreign exchange reserves and reports of $2.466 billion record home remittances in June 2020 contributed to a bullish close,” Mehanti added. Of 393 active scrips, 214 went up, 158 fell, and 21 were unchanged, while volumes were little changed at 466.251 million shares, compared with a turnover of 468.906 million in the previous session.

The market has been witnessing profit-taking by the financial institutions and leading foreign fund houses owing to continuous surge in the market for the last two weeks.

However, cause of concern was the caution shown by the IMF owing to COVID-19. The IMF said that COVID-19 had affected revenue collection and even forecast the economy to grow by one percent during the current fiscal year, and that the country was still under threat of the virus.

Sateesh Balani, director research at Ismail Iqbal Securities, said, “Equities continued on their upward trajectory and closed positive despite witnessing some profit-taking during last trading hours”. He said E&Ps (exploration and production) led the index as MOL Pakistan discovered 16.12mmcfd of gas and 3,240 bpd of oil in Tal Block.

“Energy shares, investment companies, and fertilisers contributed most to the index gains, cumulatively adding 104 points,” Balani said.

Salman Ahmad, head of institutional sales at Aba Ali Habib Securities, said, “The closing of the market showed that trend was overall mixed to stable”. However, he said the index during the session made a high 36,936 points, but 37,000 had become a psychological barrier, facing resistance, resulting in profit-taking. “Fundamentals are strong as recent remittance data showed hefty growth on monthly basis indicating healthy signs; however, selling pressure and weakness in crude oil prices somewhat trimmed share values, before the end,” Ahmed said.

Zia Shafi, senior investment advisor at Intermarket Securities, said, “The market has gained more than 2,700 points in last two weeks, which created some room for downward correction, merely on technical grounds”.

Still, some scrips had potential to gain, but investors should adopt ‘buy on dips’ strategy over the month’s horizon, Shafi added. Hinopak Motor, gaining Rs36.51 to close at Rs523.41/share, and Indus Motor Company, up Rs29.37 to finish at Rs1,220.51/share, gained the most in the day, while Phillip Morris Pakistan, down Rs50 to close at Rs1,750/share, and Indus Dyeing, losing Rs41 to close at Rs551/share, ended up as the main losers.

K-Electric Limited posted the highest volumes with 39.266 million shares and gained Rs0.24 to end at Rs3.39/share, while Jahangir Siddiqui & Company’s turnover was the lowest with 13.993 million shares, and it gained Rs0.72 to end at Rs15.47/share.

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