Stocks rally as E&P sector tracks crude oil recovery

Equities on Thursday closed higher led by hydrocarbon sector that cheered a recovery in international crude oil market, while investors also weighed expectations that central bank might go for another rate cut following a sharp fall in the yields of short tenor treasury bills during Wednesday’s auction, dealers said.

Pakistan Stock Exchange’s (PSX) benchmark KSE-100 shares index gained 1.19 percent or 386.60 points to close at 32,850.83 points, whereas its KSE-30 index followed suit with a high of 1.39 percent or 198.43 points to end at 14,424.47 points.

Brokerage Topline Securities in a note said, ”This positivity can be attributed to index heavyweight E&P (exploration and production) sector, which closed 7 percent higher on the back of recovery in international oil prices with WTI (West Texas intermediate) trading comfortably above $15/barrel level”.

The brokerage report added that pressure was observed in banking sector after State Bank of Pakistan allowed it to suspend dividends for the next two quarters, while cement sector saw some profit-taking.

Of 333 active scrips, 160 advanced, 151 retreated, and 22 ended without a change. Volumes slipped to 204.362 million shares, compared to 239.873 million in the previous session.

Salman Ahmad, head of institutional sales at Aba Ali Habib Securities, said, “The declined in the cut-off yields of the treasury bills between 200 basis points to 250 basis point came as a sentiment booster”.

Moreover, though COVID-19 uncertainties were dying hard, the market was likely to take strides once it’s over, because economic activities would bounce back even stronger after a long drought, Ahmad said.

Samiullah Tariq, director research at Arif Habib Limited said, “In the last couple of sessions, because of the crash in the US oil market, depression reigned supreme in the local oil and exploration stocks”.

However, with May contract deals completed again the crude oil price appreciated along with the international regional markets, which helped the local market gain strength as well.

Faizan Munshey, head of foreign institutional sales at Next Capital, said, "Stock market closed positive amid a surge in international oil prices which helped the index heavyweight E&Ps to close at their upper limits i.e. 7.5 percent".

Furthermore, the cement sector remained under pressure as investors booked profits after a price driven rally, Munshey added.

Fahad Rauf, deputy director research at Ismail Iqbal Securities, said, "Equities witnessed volatile session but managed to close in green, where overall trading activity was lower compared to previous session".

Analyst Ahsan Mehanti from Arif Habib Corporations said, "Stocks recovered sharply led by oil and fertiliser scrips as investors took cue from surging global crude oil prices and Moody’s affirmation of improved FY20 growth forecast at -0.5pc, recovering by more than 2 percent growth in FY21.

The top gainers were Unilever Foods, up Rs527.25 to close at Rs7,557.25/share, and Mari Petroleum, up Rs64.13 to finish at Rs1080.78/share. Bata Pakistan, after losing Rs46.75 to close at Rs1402.00/share, and Otsuka Pakistan, down Rs23 to close at Rs320.00/share, ended up to be the top losers.

Maple Leaf Cement was the volume leader with 25.623 million shares and it gained Rs1.27 to end at Rs26.72/share, while Cherat Cement’s trading volume was the lowest with 4.611 million shares and it lost Rs6.5 to end at Rs89.41/share.