Stocks rally as monetary tightening ‘pause’ priced in

KARACHI: Stocks rallied on Monday as central bank’s hinting at a 'pause' in its monetary tightening campaign to ensure sustainable economic recovery gave investors a sentimental leg-up, traders said.

Pakistan Stock Exchange's (PSX) benchmark KSE-100 Shares Index jumped 439.27 points or 1.0 percent to 44,339.95 points, testing a high and a low of 44,484.76 and 43,808.84 points.

Zafar Moti, former director PSX, said the market remained stable and positive despite fears of a fall in line with international markets.

“Crossing 44,000 points level shows that market might go towards stability, but some concerns still remain.”

“Restrictions on the dollar by the SBP (State Bank of Pakistan), as deficit account is not under control, closure of refineries and costly power supply would affect the market,” Moti said.

In rupee term, he said, the market was unable to cross Rs10 billion, which was not a good sign.

Pearl Research in its market wrap said the benchmark index witnessed a bullish session today as sentiment eased on SBP cues regarding short-term relaxation over interest rates hike. “Additionally, world oil prices are down near $70/bbl, reflecting the comfort in commodities prices, which supported the bourses,” the brokerage said.

Analyst Ahsan Mehanti at Arif Habib Corp said stocks closed higher led by scrips across the board as investors weighed upbeat textile exports, surging 28.4 percent year-on-year for July-November FY2022 and FDI (foreign direct investment) jumping by 12 percent year-on-year in July-November.

LSM (large-scale manufacturing) growth of 3.56 percent year-on-year for July-November and SBP’s lower than expected monetary tightening and affirming it was ready to pause its rate hikes led to a bullish close, Mehanti added.

KSE-30 Shares Index also gained 189.19 points or 1.09 percent to close at 17,487.33 points.

Traded shares, however, shrank by 14 million to 238.45 million from 252.20 million, while traded value increased to Rs9.39 billion from Rs8.05 billion. Market capital improved to Rs7.580 trillion from Rs7.519 trillion. Out of 343 companies active in the session, 248 posted gains, 76 losses, while 19 remained unchanged.

Topline Securities in a post-market note said investors cheered the interesting move by the central bank as it conducted a 7 and 63 days OMO injection last week on Friday which gave a signal of stability to the market.

TRG closed at its upper limit after it notified the exchange that TRG International would transfer the portion of liquid asset of TRG Pakistan in a wholly-owned subsidiary of TRGI (SPV), the brokerage said.

“This SPV will, as soon as practicable, utilise all or part of these liquid assets to purchase shares of TRGP from the market from time to time.”

Further, investors' interest was witnessed in the cement sector where LUCK, CHCC, and DGKC were the major gainers.

The highest increase was recorded in shares of Sanofi-Aventis, which rose by Rs39.65 to Rs568.35 per share, followed by Lucky Cement that increased by Rs19.16 to Rs693.74 per share.

A major decline was noted in shares of Bata (Pak) XD, which fell by Rs44.65 to Rs2,000 per share, followed by Sapphire Textile that dropped by Rs36.87 to Rs852.01 per share.

TRG Pakistan Ltd was the volume leader with 25.67 million shares, followed by WorldCall Telecom with 17.45 million shares.

Stocks that recorded significant turnover included Byco Petroleum, Telecard Limited, Silk Bank Ltd, Hum Network, Fauji Cement, Fatima Fertiliser, Azgard Nine, and Treet Corp. Turnover in the future contracts increased to 81.09 million shares from 79.65 million shares.