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January 23, 2020

OGDC stake sale chatter mutes stocks amid institutional selloff


January 23, 2020

Stocks on Wednesday dragged heels for third straight session as continuous corporate and institutional selling sent the sentiments south, amid reports of plans to sell some stake in two oil and gas blue chips at a discount, later denied, but the damage was done, dealers said.

Pakistan Stock Exchange’s (PSX) benchmark KSE-100 shares index lost 0.15 percent or 65.20 points to close at 42,561.27 points; however, KSE-30 was up 0.08 percent or 16.66 points to end at 19,739.37 points.

Of 352 active scrips, 139 were up, 189 retreated, and 24 neither gained nor lost. Volumes were flat at 177.984 million shares, as compared to 177.567 million in the previous session.

Salman Ahmad, head of institutional sales at the Aba Ali Habib Securities, said, “The major reason for the downfall were rumours the government was planning to sell stakes in OGDC (Oil and Gas Development Company) and PPL (Pakistan Petroleum Ltd) at a discount, which resulted in heavy selling pressure”.

“As these companies have a heavy weightage in the index the market players panicked following these reports; however, a clarification by Privatisation Commission led to investors taking a sigh of relief.”

The commission, in a letter, said the process divestment had been started, but the government would not sell any stake at a discount, rather, the same procedure would be followed that was applied while selling earlier stakes, taking average of the rate.

Ahmad added that with steel and cement companies likely to report weak profits for the quarter ended December 31, 2019, selling was seen in these scrips. Analyst Ahsan Mehanti from Arif Habib Corporation said, “Stocks closed lower in thin trade amid pressure over dismal financial results in cement sector and oil refineries”.

“Fertiliser and banking sector outperformed on resolve for GIDC (Gas Infrastructure Development Cess) levies and speculations on stronger earnings’ payouts.” Weak global crude oil prices and expectations of a likely policy rate status quo next week kept the stocks on a tight leash, Mehanti added.

Samiullah Tariq, director research at Arif Habib Limited, said, “The overall sentiment was positive but the rumors of OGDC stake sale at a discount, later proven baseless, resulted into a kneejerk selling response”.

“The macroeconomic indicators are quite strong as continuous recovery in current account deficit and stabilisation in rupee have helped restore investors’ sentiment to a great extent; however, a few are worried over the inflation numbers,” Tariq said.

Arif Habib Limited in a note said, “The market had an interesting session today, which saw OGDC hitting its lower circuit and then bouncing back strongly to close at day’s rate and above market average”.

“Similar activity was observed in PPL, which didn’t touch lower circuit, but faced likewise selling pressure.”

Furthermore news that concerned investors was likely selection of Financial Advisors for divestment of OGDC’s shares amidst expectation that shares would be offered at a discount to market price, the brokerage added.

Top gainers were Gatron Industries, up Rs22.93 close at Rs499/share, and Mari Petroleum, up Rs15.84 to finish at Rs1,454.50/share.

Pakistan Tobacco, down Rs79 to close at Rs2,150/share, and Mehmood Textile, down Rs24 to close at Rs417/share, were the major losers of the day.

The OGDC emerged as the volume leader with 19.238 million shares, but lost Rs5.02 to end at Rs143.89/share, while K-Electric recorded the lowest turnover with 4.461 million shares, losing Rs0.03 to end at Rs4.32/share.