Stocks rally as easing bond yields boost rate-cut hopes

Stocks rallied on Thursday led by cement, steel, and oil shares as easing cut-off yields in long-term government debt papers once again fired up anticipations of monetary softening, amid recouping global bourses, dealers said.

Pakistan Stock Exchange’s (PSX) benchmark KSE-100 shares index jumped 1.22 percent or 475.71 points to close at 39,382.11 points, while its KSE-30 index hit a high of 1.26 percent or 225.85 points to end at 18,082.11 points.

Samiullah Tariq, director research at Arif Habib Limited, said the market ended on a positive note on rate-cut expectations in the upcoming monetary statement release.

“The hopes further got cemented following the Pakistan Investment Bonds auction on Wednesday, where cut-off yields depicted a slide in the range of 16 basis points to 46 basis points. Moreover, developments like central banks across the globe from Australia to Canada had cut rates to support their respective economies following the eruption of coronavirus, which was slowing their output, also strengthened dovish monetary outlook consensus, Tariq added.

Of 370 active scrips, 253 advanced, 102 retreated, and 15 stood their ground. The ready market volumes jumped to 340.722 million shares, against 186.985 million in the previous session.

Analyst Ahsan Mehanti from Arif Habib Corporation, said, “Stocks showed recovery amid higher trades led by scrips across the board as investors weighed falling bond yields speculating a softening in central bank’s policy stance this month”.

Bullish global equities, higher global crude oil prices, reports on hydrocarbons discovery and upbeat data on trade deficit, cement sales in February made the day for stocks, Mehanti added.

Fahad Rauf, deputy director research at Ismail Iqbal Securities said, “The benchmark KSE-100 remained positive throughout the session, led by recovery in global markets and expectations of monetary easing”.

“Interest revived after a fall in PIBs cut-off yields in Wednesday’s auction, where 3-year, 5-year and 10-year bond yields decreased 46 bps, 41bps and 15bps, respectively,” Rauf added. Trading activity jumped compared with previous session where cements, fertilizers and energy stock led the index, cumulatively adding 386 points.

Faizan Munshey, head of foreign institutional sales at Next Capital, said, “The stock market traded higher throughout the day owing to narrowing trade deficit and a strengthening investor outlook for a rate-cut in the upcoming monetary policy statement”.

Salman Ahmad, head of financial institutions at Aba Ali Habib Securities, said “The market centered on rate cut expectation following steep trimming in the long-term bonds which cemented the hopes that benchmark policy rate may come down”.

The investors also took cue from the global markets, which recorded some appreciation after a long bearish spell, Ahmed added. Top gainers were Rafhan Maize, up Rs273 close at Rs7,098/share, and Colgate Palmolive, up Rs90.01 to finish at Rs2,340/share.

Phillip Morris Pakistan, down Rs100.05 to close at Rs1999.95/share, and Pakistan Services, down Rs67.86 to close at Rs925/share, lost the most. Fauji Cement rose to be the volume leader with 29.995 million shares, while it gained Rs1.13 to end at Rs17.88/share. The lowest volumes were witnessed in WorldCall Telecom’s turnover, just 8.836 million shares, was the lowest of the day, whereas it gained Rs0.05 to end at Rs0.99/share.