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August 4, 2020

Stocks sustain last week’s stellar run led by cyclicals


August 4, 2020

Stocks jumped on Monday led by cyclical stocks amid low interest rate, expectations of a strong pick-up in construction activity and exports, as the earning season rally from last week seems to be losing no steam, dealers said.

Pakistan Stock Exchange’s (PSX) benchmark KSE-100 shares index gained 1.56 percent or 613.17 points to close at 39,871.61 points level, while KSE-30 made a high of 1.47 percent or 250.44 points to end at 17,320.46 points level.

Analyst Ahsan Mehanti from Arif Habib Corporations said "Stocks closed bullish amid record trades in the earnings’ season rally at the PSX led by cement, banking, and fertiliser scrips on strong valuations”.

Upbeat provisional data for cement sales surging by 41 percent YoY in July 2020, surging urea prices, local auto prices, speculations ahead of privatisation of SOEs helped the market score big, Mehanti added.

Of 412 active scrips, 286 stepped up, 110 down, and 16 stayed unchanged. Trading volume blew up to 539.315 million shares, compared to 368.700 million shares in the previous session.

Arif Rehman, director research at Fortune Securities, said, “Continuation of the rally at the stock market is on account of lower interest rates”.

However, with equity asset class becoming favourable, the cement numbers for July were expected to be record high and despite a heavy spell of monsoon rains during the month, demand remained robust, he said.

“Steel sector has been also rallying on the back of high cement dispatches, while auto sector has also come into favour due to better demand outlook because of lower interest rates for consumer lending,” Rehman added.

Tahir Abbas, director research at Arif Habib Limited said, “Availability of liquidity in the share market pushed the index close to 40,000 points’ level, where low interest in fixed income was diverting funds to equity market”.

Several cyclical stocks like steel and cement closed on high note as low interest rate was enticing companies to commence construction activity in the country with government’s aim to seek support for “Naya Pakistan” providing shelter to homeless, Abbas added.

Muhammad Saeed Khalid, head of research at Shajar Capital, said this robust activity followed after latest numbers showed NCPI (National Consumer Price Index) based inflation came at 9.3 percent for July (above market consensus).

“We have witnessed a surge in automobile, food, pharma, and cement sectors and main items of the indices,” Khalid added. Shahab Farooq, director research at Next Capital, said, “The market maintained its positive momentum from the previous week and remained in the positive territory, shying away from the 40k points mark”.

Higher cement sales for July 2020 and expectations of enhanced construction activities put cement and steel in limelight, he said adding while, oil & gas exploration and production companies tracked falling global oil prices.

The top gainers were Rafhan Maize, gaining Rs450 to close at Rs7,950/share, and Sapphire Textile, up Rs57.99 to finish at Rs843.99/share, while Mari Petroleum, down Rs23.75 to close at Rs1,350.30/share, and Faisal Spinning, losing Rs19.99 to close at Rs305/share, were the main losers. Maple Leaf posted the highest volumes with 34.912 million shares and gained Rs1.33 to end at Rs33.78/share, whereas Pakistan Refinery recorded the lowest with 14.811 million shares, but gained Rs0.33 to end at Rs14.48/share.