Stocks soar as banks cheer State Bank status quo

Stocks soared on Monday on the wings of banks that cheered the central bank's skipping its monetary policy announcement for July, keeping the interest rate unchanged, amid a strong recovery in cement sector, dealers said.

Pakistan Stock Exchange's (PSX) benchmark KSE-100 shares index gained 1.63 percent or 613.54 points to close at 38,221.16 points, while its KSE-30 followed suit with a high of 1.95 percent or 318.92 points to end at 16,634.28 points.

Analyst Ahsan Mehanti from Arif Habib Corporation said, "Stocks closed bullish, led by scrips across the board on strong valuations and policy success over COVID-19 pandemic". Investor speculations amid upbeat financials in oil, banking and fertilisers, rupee stability, and surging global crude oil prices sealed a bullish close, Mehanti added.

Of 376 active scrips 232 were up, 129 down, and 15 were unchanged. Volumes slightly improved to 288.103 million shares, as compared with 266.531 million in the previous session.

Arif Rehman, director research at Fortune Securities, said,"Recovery was recorded in cement and banking sectors as for the last couple of sessions cement companies suffered downward correction; however, expectation that the July cement dispatches would be strong built a rally".

He said banking shares also outperformed on account of deferment of the monetary policy, which was due in the last week of July, but now it would be announced in September. "Several economists believe that to further support the economy the rate would be trimmed, which would hit the earnings of banks, but a delay in announcing the monetary policy would support the sector," Rehman said.

Tahir Abbas, director research at Arif Habib Limited, said, "The banks led the session, where activity was witnessed in this group after the State Bank of Pakistan said it would announce new monetary policy in September, which means earnings of banks would remain intact for the quarter".

Moreover, investors hoped after Eid some activity would increase in textile, cement and steel, following the resumption of the economic cycle to help improve demand, Abbas added. Salman Ahmad, head of institutional sales at Aba Ali Habib Securities said, "The bullish spell was driven by the SBP's decision to not to hold any monetary policy meeting till September, which supercharged the sentiments, prompting investors to go long on stocks".

He said another factor that supported the index was anticipation of better results in the banking sector. "Declining trend in fresh COVID-19 cases and mortality rate also restored investors’ confidence that lockdown might be completely lifted in coming days."

Going forward, future rollover week, and result season would set investors trading strategy, Ahmad added. The top gainers were Millat Tractors, gaining Rs51.14 to close at Rs857.93/share, and Hinopak Motors, up Rs39.72 to finish at Rs599.72/share, while Island Textile, down Rs85.00 to close at Rs1100.00/share, and Bhanero Textiles, losing Rs71.94 to close at Rs893.00/share, were the main losers.

Pakistan Elektron posted the highest volumes with 28.921 million shares and gained Rs1.88 to end at Rs30.79/share, while Avanceon Limited's turnover was the lowest with 5.592 million shares, whereas the scrip gained Rs2.15 to end at Rs48.79/share.