Stocks rally on strong valuations in auto, financial sectors

Stocks ended up by one percent on Friday after a volatile session, as strong valuations in financial and auto scrips attracted foreign buyers, especially on the back of expected rate hike by the central bank, dealers said.

The State Bank of Pakistan (SBP) in its monetary policy announcement scheduled for Saturday (today) might increase the benchmark interest rate, analysts said.

Analyst Ahsan Mehanti from Arif Habib Corporation said the stocks closed bullish in the earnings session rally led by auto and financial scrips on strong valuations.

Speculations ahead of SBP policy rate announcement today, rising trend in the banking spreads, higher local cement prices, and upbeat data on auto sales for July-June 2018 played a catalytic role in the bullish close, he added.

Pakistan Stock Exchange (PSX) benchmark KSE-100 shares index rose 0.99 percent or 395.88 points to close at 40,271.00 points.

KSE-30 shares index rose 1.05 percent or 206.87 points to finish at 19,865.44 points.

Of 339 active scrips, 190 advanced, 128 declined, and 21 remained unchanged.

The ready market volumes stood at 124.749 billion shares compared to a turnover of 108.897 billion shares in the previous session.

Arif Habib Limited in their report said foreigners, who were sellers in banks till the day before, surprised the market with aggressive buying in financials, resulting in Habib Bank, United Bank, and MCB trading at upper circuits.

“Main reason behind buying activity in financials is the expectation of increase in discount rate which is likely to be north of 50bps, though the street has mixed opinion ranging from an increase of 50bps to 150bps,” the report said.

On the selling side, cement sector scrips, such as DG Khan Cement and Maple Leaf Cement saw selling pressure close to market end.

Similar to the positive effect of discount rate on banks, cement sector would likely face the music in the coming sessions, it added.

The highest gainers were Phillip Morris Pakistan, up Rs119.99 to close at Rs2,889.99/share, and Pakistan Tobacco, up Rs79.37 to finish at Rs2,150.00/share.

Companies that booked highest losses were Jubilee Life Insurance, down Rs34.98 to close at Rs665.00/share, and Colgate Palmolive, down Rs20.22 to close at Rs2,919.78/share.

Bank of Punjab recorded the highest volumes with a turnover of 18.691 million shares. The bank’s scrip gained Rs0.66 to close at Rs12.14/share. It was followed by Fauji Foods Limited with a turnover of 3.442 million shares. Its scrip gained Rs0.34 to close at Rs31.25/share. The lowest volumes were witnessed in Faysal Bank, recording a turnover of 5.174 million shares and losing Rs0.58 to end at Rs26.62/share.