Leveraged stocks to find way out of portfolio after rate hike

Equity investors are likely to shed leveraged stocks that come under pressure after rate

hike, but oil price rise and inflationary impact might let them lean to blue-chip counter in the bourse, dealers said.

Habib Metro-Financial Services said the market is expected to remain in the consolidation mode over the short-term as rising oil prices along with dwindling rupee value warrant yet another increase in the cost of doing business.

“Thus, investors are suggested to tilt portfolio exposure towards blue chips,” the brokerage said in a report.

Arif Habib Limited expected the market to remain range-bound in

the upcoming week amid lack of triggers.

“With the State Bank of Pakistan (SBP) raising the key discount rate by 50 basis points, leveraged sectors such as cements, steel, fertilisers, OMCs (oil marketing companies) and textiles may come under pressure while banks could support the index.”

The KSE 100-share Index of the Pakistan Stock Exchange remained range-bound during the week as conditions attached to International Monetary Fund (IMF) package compelled investors to maintain a wait-and-watch approach.

The stocks market gained 0.3 percent week-on-week or 117 points to close at 38,649 points after making a high and a low of 38,965 and 38,129 points, respectively.

The International Monetary Fund (IMF) Mission Chief for Pakistan Ernesto Ramirez-Rigo paid a visit to Pakistan during the week and discussions with government officials mainly surrounded the current economic scenario, while Finance Minister Asad Umar expected the bailout package by the mid of May.

Activity improved this week with a daily average of 128 million shares traded compared to an average of 84 million shares traded daily last week, given increase in activity in lower priced stocks.

Positive contributions came from Sui Northern Gas Pipelines (38 points), Millat Tractors Limited (30 points), Bank Al-Habib (30 points), Engro (24 points) and United Bank Limited (24 points).

Scrips that negatively contribute to the index included Habib Bank Limited (64 points), Hubco (54 points) and Nestle (29 points).

Net foreign inflows, during the week, accumulated to $0.5 million vis-à-vis $3.1 million of net inflow recorded in the previous week.

Banking sector recorded $2.6 million in net foreign inflows and power sector logged $1.3 million.

The State Bank of Pakistan revised its projection for real GDP growth down by 50 basis points to 3.5 to 4 percent.

News flows regarding the gas utility companies seeking hefty tariff hike from the next fiscal year kept prices of Sui companies higher than the previous week’s close.

Other key news during the week were policy rate hike by 50 basis points to 10.75 percent, no plan to withdraw subsidy on gas and electricity, Gwadar terminal developer planning $85 million initial public offering, government’s plan of Rs200 billion sukuk issuance, privatisation of Haveli and Balloki power plants and new deadline of April 15 for submission of report to the Financial Action Task Force.