Stocks rally as govt weighs Rs1.3tr circular debt settlement

Stocks rose more than 1 percent on Monday, boosted by reports that the government was considering releasing Rs1.3 trillion to settle the energy sector's circular debt, which has been a major drag on the economy.

The Pakistan Stock Exchange's (PSX) benchmark KSE 100-share Index gained 657.19 points or 1.04 percent to close at 63,939.41 points after touching a high of 64,090.88 earlier in the session. The KSE-30 index also increased by 326.05 points or 1.53 percent to close at 21,601.26 points.

"Stocks closed bullish on late session speculations over reports of government decision to partially settle up to Rs1.3 trillion power sector circular debt and restoration of diplomatic ties with Iran," said Ahsan Mehanti, an analyst at Arif Habib Corp.

He added that the International Monetary Fund's affirmation of satisfactory performance under the $3 billion loan programme and strong economic outlook also played positive role in the bullish close.

Traded shares increased by 11 million shares to 298.699 million shares from 287.310 million shares. The trading value rose to Rs12.515 billion from Rs9.320 billion. Market capital expanded to Rs9.361 trillion against Rs9.265 trillion. Out of 335 companies active in the session, 140 closed in green, 171 in red and 24 remained unchanged.

Analyst Ali Najib at Topline Securities said equities commenced this week on a positive note as the benchmark index closed the day up 1.04 percent.

"Significant buying momentum was seen during the latter half of the trading session post reports circulated on different media channels regarding the finance ministry’s consideration to issue Rs1.25 trillion to the energy sector for the settlement of the circular debt," Najib said.

The aforesaid development assisted energy stocks in showing a strong rally, with both OGDC and PPL hitting their upper limit for the day. In addition, BAHL also hit the upper circuit (post their Board of Director meeting announcement which is scheduled on Jan 31, 2024, to consider CY23 financials) in anticipation of better results along with good dividend."

Resultantly, OGDC, PPL, BAHL, HUBC and MARI contributed positively by adding 546 points, cumulatively.

The highest increase was recorded in Nestle Pakistan Limited, which rose by Rs70 to Rs8,270 per share, followed by Mari Petroleum Company Limited, which increased by Rs53.28 to Rs2,428.65 per share. A significant decline was noted in Honda Atlas Cars (Pakistan) Limited, which fell by Rs20.53 to Rs254.06 per share, followed by JDW Sugar Mills Limited, which closed lower by Rs19 to Rs415 per share.

Brokerage Arif Habib Ltd stated that the market's response to the 64,000 level will be decisive, determining the short-term direction. "A successful flip to support could set the stage for bullish movements and potentially new peaks, ideally surpassing the December 2023 high of 67,000 points."

However, analysts caution that a robust rejection at the 64,000 level this week could cast a shadow over the immediate bullish expectations for the benchmark index.

"Investors are closely watching how the market behaves in response to this critical juncture, aware that a failure to establish 64,000 as a support level could pose challenges to the bullish narrative."

K-Electric Ltd. remained the volume leader with 97.700 million shares which closed higher by 13 paisas to Rs5.57 per share. Pak Petroleum followed it with 23.338 million shares, which closed higher by Rs8.73 to Rs131.01 per share.

Other significant turnover stocks included P.I.A.C. (A), Oil & Gas Dev., WorldCall Telecom, Hascol Petrol, Pak Refinery, Cnergyico PK, P.S.O. and Treet Corp. A total of 314 companies recorded future shares, of which 127 increased, 170 decreased and 17 remained unchanged.