Stocks barely afloat amid mixed monetary policy expectations

Stocks on Tuesday see-sawed to end flat amid mixed anticipations ahead of monetary policy, announced later in the day, piling losses in earlier trade on fears of a hawkish stance and then clawing back on a buzz that the central bank may stick to status quo, dealers said.

Topline Securities in a note said," During the intraday trade the benchmark index recorded a decline of 354 points to trade at 32,604 points’ level; however, it later reclaimed 368 points as rumors pertaining to no interest rate hike were doing rounds in market”.

“Commercial banks positively added 47 points while oil and gas exploration and production companies eroded index by 57 points,” the brokerage said. Pakistan Stock Exchange (PSX) benchmark KSE-100 shares index gained 0.04 percent or 13.67 points to close at 32,972.02 points level. KSE-30 shares index followed suit with a high of 0.11 percent or 17.80 points to end at 15,591.80 points level.

Of 316 active scrips, 148 moved up, 149 retreated, and 19 remained unchanged. The ready market volumes stood at 138.726 million shares, as compared with the turnover of 69.191 million shares in the previous session.

Afaz Mustafa, CEO Ismail Iqbal Securities, said “The SBP (State Bank of Pakistan) increased policy by a further 100 bps, but clearly stated that this round of tightening is done and further actions will be data based”. This is very encouraging considering that this may signal the peak of the rate cycle and the economy may be able to turn the corner, Mustafa said, adding the central bank governor had also opened up the possibility of a rate cut depending on inflation data and the need to stimulate demand.

“Overall, we can view this as a very encouraging statement which may start the revival of the economy,” he added. Analyst Ahsan Mehanti from Arif Habib Corporations said, “Stocks showed recovery led by selected auto, oil and banking scrips on strong valuations”. Uncertainty over SBP policy rates announcements later today and SBP report hinting economic slowdown in FY20 depicting GDP growth at 3.3 percent in FY19 invited midsession pressure, Mehanti said. “Dismal data on foreign direct investment in FY19, reports on surging bank deposits and higher banking spreads, hike in local auto prices and higher global crude oil prices helped the index stay afloat,” Mehanti added.

Salman Ahmad, head of institutional sales at Aba Ali Habib said, “All eyes and ears were glued to the monetary policy announcement. A general perception was that the interest rates will go up by 100 basis points, which led to fresh declines during the session”.

However, before the closure of the market index recovered sharply on back of the rumors that the interest rate might remain unchanged, Ahmad said. “The decision of the central bank would set tone of the market in the remaining session of the week,” the Aba Ali Habib analyst added.

The highest gainers were Archroma Pakistan, up Rs15 to close at Rs480/share, and Service Industries Limited, up Rs14.85 to finish at Rs469.85/share. Companies that booked highest losses were Colgate Palmolive, down Rs49.50 to close at Rs2000/share, and Khyber Textile, down Rs22.80 to close at Rs433.20/share.

K-Electric Limited recorded the highest volumes with a turnover of 20.303 million shares. The scrip lost Rs0.1 to close at Rs3.71/share. The lowest volumes were witnessed in Pakistan Elektron, recording a turnover of 2.767 million shares, whereas the scrip gained Rs0.18 to end at Rs18.26/share.