Banks bring market back on feet amid next IMF tranche hopes

Stocks on Tuesday rose from the ashes after a burnout a day earlier led by banking sector amid hopes Pakistan will secure the second tranche of $6 billion loan programme at the end of the review talks with International Monetary Fund underway in the federal capital, dealers said.

Analyst Ahsan Mehanti from Arif Habib Corporation said, “Stocks showed recovery led by banking and cement scrips on strong valuations and finance minister’s affirmations that as a result of the government’s ongoing initiatives inflation will soon ease”.

Higher global stocks, stronger banking sector financial results, reports of likely FATF (Financial Action Task Force) grey list exclusion in Paris review this month, rupee stability and investor speculations over Rs150 billion target in state-run entities’ privatisation programme led to a positive close in the earnings season rally at the PSX,” Mehanti added.

Pakistan Stock Exchange’s (PSX) benchmark KSE-100 shares index gained 1.18 percent or 474.86 points to close at 40,884.24 points, whereas its KSE-30 index secured 1.49 percent or 275.29 points to end at 18,790.72 points.

Of 350 active scrips, 246 were up, 92 down, and 12 ended neutral. Volumes reduced to 146.091 million shares, compared to 203.139 million in the previous session.

Samiullah Tariq, director research at Arif Habib Limited, said, “The share market recovered on the back of banking results especially MCB Bank, boosting expectations of good performance of the sector, which helped restore some confidence among general investors”.

“Fundamentals are strong, but concerns over the higher inflation rate persist; however with the IMF-Pakistan talks moving on positively and the government’s initiative to fulfill the fund’s demand, the sentiment remains strong,” Tariq added.

Salman Ahmad, head of institutional sales at Aba Ali Habib Securities, said the market staged a comeback on fresh buying in banking sector, where results of MCB Bank breathed new life into investor sentiment.

“Moreover the ongoing meeting with the IMF appeared to be a positive one for the market players as the Fund has shown satisfaction on the country’s second quarter performance, which will further strengthen the currency as the approval will lead to release of second tranche amounting $450 million,” Ahmad added.

A leading analyst said the market had since long been witnessing erosion and time was ripe to accumulate some of the shares that recorded hefty declines in recent bear-run.

“The market lost near three percent after January inflation numbers devastated hopes of any ease in monetary policy for at least six to eight months or till the inflation starts tapering off,” he said.

Arif Habib Limited in a note said, “Market staged recovery after a major drawdown of 1222 points on Monday and largely remained positive throughout the session barring -60 points earlier in the session”.

Banking sector played an important role in the market recovery, while MCB Bank’s result further helped the other sector stocks to post gains, the brokerage house added.

Top gainers were Sapphire Textile, up Rs54.71 to close at Rs966.70/share, and Sapphire Fiber, up Rs42.35 to finish at Rs748.31/share.

Major losers were Pakistan Tobacco, down Rs100 to close at Rs2,000/share, and Shezan International, down Rs24 to close at Rs427/share.

Bank of Punjab recorded the highest volumes with 16.354 million shares and gained Rs0.28 to end at Rs13.12/share.

Fauji Cement’s turnover was the lowest at 2.656 million shares, whereas the scrip gained Rs0.58 to end at Rs16.87/share.