Market watch: Stocks rally as current account deficit shrinks

Benchmark KSE-100 index adds 200.25 points to settle at 43,230.22

KARACHI:

Bulls staged a comeback at the Pakistan Stock Exchange on Monday, as the benchmark KSE-100 index, after staying in the green zone throughout the day, gained 200 points and started the week on a positive note.

However, the trading volume and value remained thin mainly due to the prevailing scepticism on the domestic and international fronts.

A surprising plunge in Pakistan’s current account deficit (CAD) to a sustainable level of $545 million (an eight-month low) in February 2022 bolstered the confidence of market players, who made fresh stock purchases across the board.

Moreover, the resolution of Reko Diq dispute also encouraged the investors to resume the cherry-picking of stocks at attractive valuations.

Earlier, the trading session began with a sharp incline as the benchmark index rose to around 43,357 points in the initial hour. However, a brief selling spree, due to the prevailing volatility on the domestic political front, soon pulled the index down to around 43,147 points.

Moving forward, the index registered minor fluctuations but remained in the green zone. It touched an intra-day high of 43,388 points during the final hours and managed to end trading in the positive zone.

At close, the benchmark KSE-100 index recorded an increase of 200.25 points, or 0.47%, to settle at 43,230.22 points.

Topline Securities, in its report, said that Pakistan equities commenced the week on an encouraging note on the back of news regarding the resolution of Reko Diq dispute coupled with better-than-expected CAD figures for February.

Fertiliser, cement and exploration and production sectors supported the KSE-100 index by adding 150 points cumulatively.

On the flip side, United Bank, Bank AL Habib and Habib Metropolitan Bank faced some profit-taking as they lost 33 points collectively, the report said.

A report of Arif Habib Limited stated that the benchmark index stayed in the green zone as CAD shrank 78% in February.

Moreover, the federal government and the provincial government of Balochistan signed a new agreement with Barrick Gold Corporation of Canada for the extraction of gold and copper reserves from Reko Diq with an investment of $10 billion, it pointed out.

In the exploration and production sector, Oil and Gas Development Company (OGDC) and Pakistan Petroleum Limited (PPL) were in the limelight as the federal government’s 25% shareholding would be divided equally amongst three state-owned-entities – OGDC, PPL and Government Holdings (Private) Limited (GHPL).

“Main board activity remained dull. On the flip side, activity continued to remain sideways as the market witnessed hefty volumes in third-tier stocks,” the report said.

Sectors contributing to the performance included fertiliser (+58.6 points), cement (+37.8 points), exploration and production (+24.4 points), banks (+21 points) and investment banks (+17.2 points).

JS Global analyst Mubashir Anis Naviwala said that bulls made a comeback as the market touched an intra-day high of 43,388 points, however, it closed up by only 200 points at 43,230 points.

Summit Bank (+23%), Hum Network (+3.8%), WorldCall Telecom (-2%), Treet Corporation (+1%) and Engro Fertilisers (+0.2%) cumulatively contributed 37% to the total volumes.

“Going forward, we expect range-bound activity to continue in the coming sessions due to concerns over the economic outlook and geopolitical situation,” the analyst said.

“We recommend investors to adopt a buy-on-dip strategy in banking, exploration and production and cement sectors.”

Overall trading volumes dropped to 124.9 million shares compared with Friday’s tally of 180.4 million. The value of shares traded during the day was Rs3.9 billion.

Shares of 317 companies were traded. At the end of the day, 165 stocks closed higher, 126 declined and 26 remained unchanged.

Summit Bank was the volume leader with 16.1 million shares, gaining Rs0.53 to close at Rs2.86. It was followed by Hum Network with 8.9 million shares, gaining Rs0.24 to close at Rs6.53 and WorldCall Telecom with 7.97 million shares, losing Rs0.03 to close at Rs1.47.

Foreign institutional investors were net sellers of Rs45.1 million worth of shares during the trading session, according to data compiled by the National Clearing Company of Pakistan.