Market watch: KSE-100 hits 16-month peak as CDNS cuts rates

Benchmark index rises 1,080.76 points to settle at 42,480.76

KARACHI: The stock market roared on Thursday as the KSE-100 index surged 1,081 points and crossed the 42,000-point mark to trade at 16-month highs.

According to research houses, traders are aggressively relocating investment to the stock market from the fixed-income saving products.

During the day, the Central Directorate of National Savings (CDNS) reduced rates of return on its saving schemes, which provided the market with a much-needed positive trigger and further strengthened investor sentiment. A decline in the rate of return signals an improvement in the economy, hence, the development was welcomed by the market participants.

The KSE-100 index had closed the previous year as one of the best-performing indices in the region with a 10% return. This news particularly bolstered investor confidence and sparked a rally on the very first trading session of the year, which continued for the second day as well.

Moreover, the inflation reading for December was largely in line with market expectations, hence, the mood at the bourse remained unchanged during the day.

Inflation came in at 12.63% for December 2019 against market expectations for a reading of between 12.8% and 13%.

Earlier, trading began with a spike at the stock market and the uptrend continued for the rest of the day.

At close, the benchmark KSE 100-share Index recorded an increase of 1,080.76 points, or 2.61%, to settle at 42,480.76.

"Earlier in the day, there were rumours in the market that the Central Directorate of National Savings would announce a significant cut in rates of return on investment in national saving products on Thursday," Arif Habib Limited Head of Equity Sales Saad bin Ahmed said while talking to The Express Tribune.

"This development turned out to be a positive trigger and sparked buying at the stock market."

Secondly, institutional investors, mostly banks, were apparently making new year buying, he said.

Banks stood liquidated by the end of December 2019. "They are making substantial buying at every point," he said. "On the other hand, foreigners are also buying stocks."

JS Global analyst Maaz Mulla said the new year had so far been lucky for the Pakistan Stock Exchange as the benchmark index continued its bull-run for the second consecutive day, touching a high of 42,544 (+1,144) points and closing at 42,481 (+1,081).

On the news front, the federal cabinet at an urgent meeting approved proposed amendments to the Constitution and the Army Act in order to give a three-year extension to Chief of Army Staff General Qamar Javed Bajwa.

Major market movers of the day were Hubco (+5%), HBL (+3.2%), Engro (+3.3%), UBL (+3.9%), Pakistan Petroleum (+3.3%), Lucky Cement (+5%) and Oil and Gas Development Company (+3%).

Moreover, investor interest was witnessed in the cement and banking sectors where Lucky Cement (+5%), DG Khan Cement (+4.2%), Fauji Cement (+2.7%), Cherat Cement (+2.8%), Bank AL Habib (+4.4%), UBL (+3.9%), Bank Alfalah (+3.4%), Faysal Bank (+4.6%) and MCB Bank (+2.3%) were the major gainers.

The steel sector also enjoyed a bull-run where Mughal Steel (+5%), International Industries (+5%), Amreli Steels (+4.5%), Aisha Steel Mills (+4%) and International Steels (+3.2%) closed higher than their previous day's close.

"Moving ahead, we expect the market to remain positive in the medium term. However, profit-taking cannot be ruled out in the short term," the analyst added.

Overall, trading volumes rose to 412.4 million shares compared with Wednesday's tally of 330.7 million. The value of shares traded during the day more than doubled to Rs17.1 billion.

Shares of 380 companies were traded. At the end of the day, 297 stocks closed higher, 72 declined and 11 remained unchanged.

K-Electric was the volume leader with 46.8 million shares, gaining Rs0.01 to close at Rs4.77. It was followed by The Bank of Punjab with 27.9 million shares, gaining Rs0.31 to close at Rs12.04 and Fauji Foods with 21.5 million shares, gaining Rs0.36 to close at Rs15.81.

Foreign institutional investors were net sellers of Rs154.4 million worth of shares during the trading session, according to data compiled by the National Clearing Company of Pakistan.