Stocks rally more than 1pc on expected reduction in circular debt

Stocks increased 1.11 percent on Tuesday as blue-chip energy shares rallied over reports that the government plans to reduce circular debt to improve financial health of the companies, dealers said.

Nauman Khan, head of research at Foundation Securities, said the budget anxiety was keeping investors on the sidelines, with questions remaining on the amnesty scheme.

“The market extended the bullish momentum by another 500 points, however volumes remained depressed, though were a bit better compared to the last session,” he added. It was a result packed day, with lower than anticipated losses posted by Fauji Fertilizer Bin Qasim, which created positive sentiments towards the stock.

Pakistan Stock Exchange (PSX) benchmark KSE-100 shares index rose 1.11 percent or 504.74 points to close at 45,876.70 points. KSE-30 shares index rose 1.26 percent or 282.08 points to close at 22,628.25 points. As many as 393 scrips were active of which 248 advanced and 127 declined, whereas 18 remained unchanged.

The ready market volumes stood at 154.282 million shares as compared with the turnover of 112.615 million shares a day earlier.

Analyst Ahsan Mehanti at Arif Habib Corporation said stocks closed bullish led by oil, banking and auto scrips in the earnings season rally as investor cheered Rs5.7 trillion proposed budget outlay of Federal Budget 2018/19 and strong financial results.

Prime Minister Shahid Khaqan Abbasi’s announcement for release of Rs100 billion to reduce the circular debt invited mid-session institutional interest in oil stocks, he said, and added, “Upbeat data for textile exports in March 18 and rupee stability played a catalytic role in the bullish close.”

Pakistan State Oil (PSO) and other stocks belonging to oil and gas sector surged sharply. PSO on Monday said that in March the government released Rs23 billion, but still power companies owed nearly Rs186 billion, while Sui Northern Gas Pipeline Ltd owed Rs22 billion.

KSE-100 got an additional boost due to urea sales surging by 65.4 percent to 342,000 tons coupled with textile and clothing exports which grew 13 percent YoY to $1.2 billion in March, an analyst said.

According to a few reports, Prime Minister Shahid Khaqqan Abbasi has asked the Ministry of Finance to make arrangements for the circular debt. The amount is expected to be released by next month to reduce the volume of circular debt which has reached to the tune of Rs650 billion.

Companies with the highest gains included Pakistan Tobacco, up Rs52.33 to close at Rs2,207.33/share, and Colgate Palmolive, up Rs49.99 to close at Rs3,450.00/share.

Companies with the most losses were Rafhan Maize, down Rs196.67 to close at Rs7,903.33/share, and Bata Pakistan, down Rs136.39 to Rs2,644.61/share.

Highest volumes were witnessed in Fauji Foods with a turnover of 8.17 million shares. The scrip gained Rs1.87 to close at Rs39.45/share. It was followed by Lotte Chemical with a turnover of 6.69 million shares. Its scrip gained 23 paisas to close at Rs10.54/share.

Lowest volumes were witnessed in Pak Electron with a turnover of 10.15 million shares. Its scrip fell Rs1.99 to close at Rs45.96/share.