Market watch: MSCI rebalancing, bond float spark interest in attractive blue chips

Benchmark KSE-100 Index rises 337.47 points to settle at 40,010.36

KARACHI: A semi-annual rebalancing by the global index provider MSCI and Pakistan’s successful foray into the international bond market to shore up foreign currency reserves brought a brief respite from intermittent losing streaks at the stock market.

Amid bullish sentiments, a rarity under the current political and economic scenario, local institutional investors heavily bought undervalued blue chips at attractive prices, which reflected their confidence in the market.

At close, the benchmark KSE 100-share Index registered an increase of 337.47 points or 0.85% to settle at 40,010.36.

According to Elixir Securities, Pakistan equities surged on the last day of the short week with the highest turnover in almost four months thanks to the MSCI rebalancing.

“Despite expected foreign selling, the higher turnover on the benchmark KSE-100 index indicates revival of confidence as local institutional investors reportedly built positions in undervalued blue chips post-successful subscription of Sukuk and Eurobonds worth $2.5 billion,” Elixir said.

Engro Corp (+0.8%), which was removed from the MSCI Emerging Markets Index, topped the leaders’ board and closed positive.



Meanwhile, Sui Northern Gas Pipelines (SNGPL, -4.8%) and Sui Southern Gas Company (SSGC, -2.3%) came under heavy selling pressure with sentiments mainly dented after the release of a working paper by the oil and gas regulator, which proposed lower returns for the gas companies.

“After today’s healthy participation in index names, we see the KSE-100 Index capturing more ground in the coming week driven by local interest. The direction of foreign flows after the long weekend will remain crucial in pushing the bullish trend,” the report added.

JS Global analyst Danish Ladhani said the stock market showed slightly positive sentiments, closing up 337.47 points at 40,010.

The market recovered as the government made its fifth foray into the international bond market, raising $2.5 billion by selling $1.5 billion worth of 10-year Eurobonds and $1 billion worth of five-year Sukuk. The MSCI semi-annual rebalancing also provided support.

Local institutions took the opportunity to buy stocks at attractive prices. Volumes improved to 181 million shares.

TRG Pakistan (+2.54%) led the volumes with trading in more than 23 million shares.

Some major gainers were United Bank (+4.14%), Habib Bank (+1.29%) and MCB Bank (+3.42%) that steered the market upwards by 160 points. Overall, there was a rally in the banking sector.

On the flipside, Kot Addu Power Company (-1.52%) and SNGPL (-4.83%) were the major laggards.

Selling pressure was noted in Engro (+0.31%) with more than 22 million shares changing hands. The pressure could be attributed to the exclusion of the stock from the large-cap MSCI Emerging Markets Index and its inclusion into the small-cap index. Domestic buyers took the opportunity to accumulate the stock at dips.



Selling pressure was also witnessed in gas utilities. SNGPL (-4.83%) and SSGC (-2.28%) closed in the red zone.

The oil and gas exploration and production sector gained (+0.2%) where Pakistan Oilfields (+1.31%) and Pakistan Petroleum (+0.07%) were positive.

“Moving forward, we suggest investors to opt for value buying and recommend selling on strength,” Ladhani added.

Overall, trading volumes rose to 180.7 million shares compared with Wednesday’s tally of 114 million.

Shares of 353 companies were traded. At the end of the day, 189 stocks closed higher, 143 declined while 21 remained unchanged. The value of shares traded during the day was Rs16.01 billion.

TRG Pakistan was the volume leader with 23.3 million shares, gaining Rs0.96 to close at Rs38.77. It was followed by Engro Corp with 22 million shares, gaining Rs0.81 to close at Rs262.32 and SNGPL with 16.01 million shares, losing Rs5.22 to close at Rs102.90.

Foreign institutional investors were net sellers of Rs2.087 billion during the trading session, according to data compiled by the National Clearing Company of Pakistan.