Stocks end green on market reform bets, sound corporate results

Stocks on Tuesday opened October on a green note, betting on market reforms, drawing strength from some robust corporate results, looking forward to a likely rise in cement prices, and central bank governor comments, dealers said.

Pakistan Stock Exchange’s (PSX) benchmark KSE-100 Shares Index gained 0.55 percent or 175.47 points to close at 32,254.32 points, while KSE-30 ticked up 0.60 percent or by 89.42 points to end at 15,107.45 points.

Of 368 active scrips, 245 were bullish, 112 bearish, and 11 showed no change, while turnover was 180.728 million shares, compared to 166.047 million on Monday.

Faisal Shajji, strategist at Standard Capital, said, “The market surged in terms of activity in most of the blue chips, whereas positive outlook was mainly due to purported steps to be taken by regulators for the benefit of investors”.

News relating to improving macroeconomic outlook is being taken positively by investors, Shajji said. “Also dividend announcements from certain corporate entities are also arousing investor confidence,” he added.

Salman Ahmad, head of institutional sales at Aba Ali Habib Securities, said, “Stocks showed better performance on the back of reports that cement price has been increased to help improve earnings of cement companies”.

Furthermore, Ahmad said, cement and steel shares were quite active on the news the government had been considering a proposal to be finalised soon to give incentive to builders and developers. “The FBR (Federal Board of Revenue) will not ask about the source of income or funds deployed in their projects and if this law is passed it will help several industries grow including cement and steel sectors,” Ahmad added.

Unveiling a macroeconomic road map, the central bank governor said the exchange rate was now been stable, while economy would show growth as curbs on imports had resulted in reducing the current account deficit that at one time had reached a historic high of $2 billion/month. The governor also said now the reserves had ample room and could cover over two months of imports.

An analyst said another positive development was the arrival of foreign investors in the bonds market. Since the start, the foreign funds have been net buyers of treasury bills, the analyst added. When these investors enter emerging market they not only buy government bonds, but also cherry-pick stocks, which bodes well for the capital market, the analyst added.

Topline Securities, in its quarterly report, said, “The first quarter of FY20 witnessed an overall decline of 5.4 percent QoQ to close at level of 32,079”.

The market turned negative and returned -15 percent in first half of the quarter as the government mulled setting aggressive tax collection target of ~Rs5.5 trillion from an already weakened economy in FY20, which resulted in higher inflation and weighed on overall economy and corporate profits, the brokerage added.

“In second half, index generated positive return of 9 percent as secondary market yields on longer tenor government bonds started coming down in range of 70-170 basis points,” Topline said.

The highest gainers were Bata Pakistan Limited, up Rs45 close at Rs1245/share, and Bhanero Textile, up Rs37.42 to finish at Rs857.13/share.

Companies that booked highest losses were Phillip Morris Pakistan, down Rs161.54 to close at Rs3,069.41/share, and Rafhan Maize, down Rs90 to close at Rs6,000/share.

With a turnover of 22.886 million shares, K-Electric Limited remained the top traded stock, while it gained Rs0.22 end at Rs3.77/share.

International Steels Limited’s volume was the lowest at 3.718 million shares; however, it strengthened by Rs1.44 to end at Rs41.18/share.