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September 17, 2019

Stocks rally as a black-swan spike in global crude fires up oil sector


September 17, 2019

Stocks on Monday rallied after a black-swan spike in global crude oil market sent the local oil heavyweights surging amid die-hard expectations of a dovish monetary policy, seen setting the tone of economy as well the equities down the line, dealers said.

Oil prices surged nearly 20 percent at one point on Monday, with Brent crude posting its biggest intraday gain since the 1990-1991 Gulf crisis, after an attack on Saudi Arabian oil facilities at the weekend halved the top producer’s production.

Analyst Ahsan Mehanti from Arif Habib Corporations said, “Stocks closed bullish amid higher trades as investors weighed a sharp surge in global crude oil prices after devastating drone strikes on two major Saudi oil installations disrupted world oil supply”. Speculations on central bank policy rate announcement, likely resolution of Gas Infrastructure Development Cess issue this week by Supreme Court and the government’s renewed resolve for privatisation of 17 state-owned enterprises gave stocks a close, Mehanti added.

Pakistan Stock Exchange’s (PSX) benchmark KSE-100 shares index gained 1.42 percent or 447.24 points to close at 31,928.55 points, while KSE-30 shares jumped 1.56 percent or by 232.12 points to end at 15,066.29 points.

Of 345 active scrips, 184 up, 144 retreated, and 17 remained unchanged. The ready market volumes stood at 104.605 million shares, as compared with the turnover of 103.093 million shares in the previous session.

Madiha Javed, head of research at Ismail Iqbal Securities, said, “The benchmark index remained positive throughout the session today as oil prices soared after the drone attacks on Saudi Arabia’s oil facility over the weekend”. This attack impacted almost half of Saudi oil output that is equal to 6 percent of global production, Javed added.

“Brent futures rose as much as 20 percent to $71.95/bbl but settled at $65.77/bbl, up 8.4 percent, while Arab light was up 12 percent to $67.49/bbl but eased to $66.16/bbl, up 9.7 percent,” she said.

Furthermore, Javed said oil and gas exploration, commercial banks, and oil marketing companies contributed most to the index, cumulatively adding 420 points.

Salman Ahmad, head of institutional sales at Aba Ali Habib Securities, said, “Exorbitant increase in international crude oil price boosted the local oil stocks and owing to their heavy index weightage the overall share prices also benefitted from it”.

The trading from word go was in the plus column and in just fifteen minutes of business gained more than 300 points. The index during the session hit a high of 31,889 points and a low of 31,481 points.

The market got further strength from rising global crude oil that, at one point, was up by 20 percent; however, it eased a bit after US President Donald Trump allowed release of stocks from their strategic reserves to cool down the price. A drone attack on Saudi oil installation that halted the supply of 5.7 million barrels per day or 5 percent of global supply was also a big blow. The highest gainers were Nestle Pakistan, up Rs140 close at Rs5890/share, and Colgate Palmolive, up Rs39.27 to finish at Rs2134/share.

Companies that booked highest losses were Rafhan Maize, down Rs289 to close at Rs5711.00/share, and Murree Brewery down Rs27.85 to close at Rs712.00/share.

DG Khan Cement recorded the highest volumes with a turnover of 6.719 million shares, but lost Rs0.68 to end at Rs47.13/share. Amreli Steels’ volumes remained lowest at 3.133 million shares, whereas the scrip gained Rs0.56 to end at Rs19.48/share.

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