Stocks up on valuations, SBP’s optimism on economy

Stocks on Wednesday rallied on strapping valuations with investors summoning sentimental support from central bank governor’s economic optimism and announcement of incentives to get the exports back on the upward track, dealers said. Pakistan Stock Exchange’s (PSX) benchmark KSE-100 shares index gained 1.09 percent or 401.40 points to close at 37,166.96 points level, while its KSE-30 index followed secured 1.14 percent or 195.60 points to end at 17,312.77 points level.

Topline Securities in a note said, “After depicting a flattish trend in last session, the benchmark index returned to its upward trajectory”. “The last time the market saw 37,000 was back in April 2019, nearly seven months ago.”

As per rumors in the market, today’s rally could be attributed to the pension fund’s investment in mutual funds, the brokerage report said. “Furthermore, most of the textile stocks closed positively in range of 3-5 percent on recent export based incentives package announced by SBP (State Bank of Pakistan),” the report added.

Out of 379 traded scrips, 230 advanced, 130 retreated, and 19 remained unchanged, while turnover touched 275.430 million shares, down 6 percent compared to 292.060 million recorded in the previous session.

Analyst Ahsan Mehanti from Arif Habib Corporations said, “Stocks showed recovery led by oil and banking scrips on strong valuations”. Easing political noise, central bank’s announcement to raise export finance scheme to Rs100 billion, recent foreign inflows, and rupee stability resulted in a rally at the PSX despite mid-session pressure over dismal July-October auto sales and weak remittances, Mehanti added.

Samiullah Tariq, director research at Arif Habib Limited, said, “The PSX traded value reached Rs10.749 billion, the highest for 2019”. On October 11, 2019, the value traded was Rs10.57 billion, which was the highest before today’s trading session, while on December 31, 2018, the traded value for the market was Rs11.056 billion, Tariq added.

Salman Ahmad, head of institutional sales at Aba Ali Habib Securities, said, “Central bank governor’s statement that economy has started recovering helped bolster the sentiment at the market, while announcement of incentives for importers hints worries over the exchange rate has been resolved”. The happenings on macroeconomic indicators and no immediate threat from the political horizon seems main causes behind healthy rise in the index, Salman added.

Reza Baqir, Governor SBP, on Tuesday said the foreign exchange market was stable and the stock market was bullish after the implementation of the International Monetary Fund’s programme in the country. Increase in the SBP’s foreign exchange reserves last week was due to improvement in market sentiment and falling forward-booking liabilities, Baqir added.

Arif Habib Limited in their market analysis said, “Selling activity kept the buyers on toes but activity picked pace later closing the session with 340 points”. Buying activity was largely observed in textile, banks and steel sectors that pulled up the index, whereas cement sector saw selling pressure throughout the day, the brokerage house added. Island Textile, up Rs68.32 close at Rs1435.59/share, and Mari Petroleum, up Rs50.32 to finish at Rs1257.44/share, were the top gainers of the day.

The top losers included Colgate Palmolive, down Rs29.99 to close at Rs1920.01/share, and Murree Brewery, down Rs25.70 to close at Rs664.30/share.

Unity Foods posted the highest volumes with 16.463 million shares, gaining Rs0.48 to end at Rs11.66/share. Siddiqsons Tin ended up with the lowest turnover of 6.532 million shares, whereas the scrip lost Rs0.07 to close at Rs13.19/share.