Drop in T-bill yields propels stocks higher

KSE-100 index surges 697.72 points, settles at 64,617.57

KARACHI:

Bulls pushed the stock exchange above 64,500 with gains of nearly 700 points on Thursday, boosted by investor optimism following a drop in yields on government papers in the latest auction and ahead of IMF executive board meeting on loan tranche approval.

The KSE-100 index rose as soon as trading began as lower bond yields bolstered investor confidence, putting the market on an upward trajectory. Furthermore, expectations of a reduction in policy rate by the State Bank of Pakistan (SBP) in the forthcoming monetary policy announcement triggered a buying spree. Resultantly, the index touched its intra-day high at 64,700.97 points.

Expectations of a favourable outcome from the International Monetary Fund (IMF) board meeting on the release of second loan tranche of $700 million aided the market’s momentum.

With positive activity almost throughout the day, the index closed in the green, breaking a three-day losing streak. “Bullish activity was witnessed amid a slump in government treasury bond yields up to 59 basis points and upbeat data on home remittances that surged 13% to $2.38 billion in December 2023,” said Arif Habib Corp MD Ahsan Mehanti.

“Surging exports, shrinking trade deficit and investor speculation ahead of major earning announcements due next week played the role of catalysts in bullish close at the PSX,” he said. At close, the benchmark KSE-100 index recorded an increase of 697.72 points, or 1.09%, and settled at 64,617.57.

Topline Securities, in its report, noted that the trading session concluded with the index reaching 64,617, with gains of nearly 700 points.

“Investor optimism was fuelled by expectations of a positive outcome from the meeting of the IMF regarding the second loan tranche of $700 million,” it said.

Read Despite fall, PSX stays above 64,000 mark

Additionally, the T-bills auction held on Wednesday indicated the market’s inclination towards an anticipated rate cut in the upcoming months, evident from substantial participation as investors sought higher yields. Total participation reached around Rs2.75 trillion before the expected decline in the rate.

As a result, Mari Petroleum, Pakistan Petroleum, Oil and Gas Development Company, Habib Bank and Hub Power collectively contributed 406 points, Topline added.

Arif Habib Limited (AHL), in its review, stated that the recapitalisation of 64,000 points kept the tight trading range intact with resistance at 65,000. “The index remains little changed on the week with positive news flow from the IMF expected to give a boost to Friday’s session to close at the week’s high,” AHL added.

JS Global analyst Muhammad Shuja Qureshi said that the market closed positive after three consecutive negative sessions.

A drop in T-bill yields turned investor sentiment positive as they hoped for a rate cut in the coming monetary policy meeting, he said. “Investors are advised to accumulate value stocks on dips,” the analyst added.

Overall trading volumes decreased to 586.5 million shares against Wednesday’s tally of 636.2 million. The value of shares traded during the day was Rs17.02 billion.

Shares of 360 companies were traded. Of these, 204 stocks closed higher, 131 dropped and 25 remained unchanged.

K-Electric was the volume leader with trading in 198.5 million shares, gaining Rs0.29 to close at Rs6.01. It was followed by Pakistan International Airlines with 33.9 million shares, gaining Rs1 to close at Rs10.99 and Pakistan International Bulk Terminal with 27.4 million shares, gaining Rs0.35 to close at Rs7.15. Foreign investors were net buyers of shares worth Rs14.6 million.

Published in The Express Tribune, January 12^th, 2024.

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