Stocks rally, as investors cheer removal of duties

Stocks staged a rally during the outgoing week on the back of the economic reform stimulus given to the sagging industries, however, if the gas development infrastructure cess (GIDC) gets resolved in the coming sessions, the index will likely see healthy surge.

The benchmark KSE-100 shares index gained around 958 points or 2.4 percent to close at 40,624 points level on the back of favourable announcements in the Economic Reforms package announced by the finance minister during the week. Market activity too improved with average daily traded value/volumes going up by 32 percent and 43 percent to $53 million and 168 million shares, respectively.

An analyst from Elixir Securities said in the recently announced package, the government introduced a number of measures, including removal of duties and taxes in certain sectors and under certain conditions, to promote businesses.

The major sigh of relief came in the form of absence of additional taxation measures and hikes in GST and FED, contrary to expectations.

Gains were mainly led by aggressive foreign buying in commercial banks and oil and gas exploration sectors, contributing 575 points (59 percent), and 138 points (14 percent), respectively.

Auto sector continued its rally with a weekly return of 4.2 percent, as investors lauded the measures announced in the mini-budget. Honda Atlas Cars went up 6.4 percent, Pak Suzuki 24 percent, and Indus Motors shares increased by 1.5 percent.

Foreign Investors clocked in net buying of $17 million during the week. Amongst the domestic investors, brokers were the only net buyers mopping shares worth $2.4 million. Individuals and banks remained major sellers, offloading shares worth $7.4 million and $3.4 million, respectively.

Finance Minister Asad Umar and advisor to prime on trade and commerce announced that a Deal on Chinese financing would be received in a few days, as the agreement has almost been finalised.

They said trade agreement has also been on the cards, which would boost economic activity.

The government's decision to waive 50 percent of the gas development infrastructure cess was welcomed by the market allowing for strong performance of related stocks. Furthermore, the Prime Minister held meetings with his Qatari counterpart to discuss LNG supply on deferred payments.

An analyst from BMA Capital Management said the market was likely to be driven by potential impact of further economic decisions slated to be taken by the government, such as rationalisation and/or increase in custom duties, regulatory duties, and tabling of GIDC dispute.

Another key data point would be the monetary policy announcement next week. The analyst said that the continuation of buying by foreign investors, might unlock price discovery at the local bourse.

“We expect the market to continue its positive rally on the heels of improving foreign inflows in the local equity bourse,” an analyst from Arif Habib Ltd said.

Foreigners would remain net buyers during the next week as well. Moreover, an unchanged discount rate announcement in the upcoming monetary policy was also likely to keep the jubilance intact.