PSX rallies on earnings season boost

Pakistan Stock Exchange (PSX) on Thursday made a modest recovery in an earnings season rally, influenced by the drop in bond yields and expectations of industrial power tariff reduction following approval from the International Monetary Fund (IMF).

Analysts highlighted that the positive market sentiment was driven by a $1.2 billion current account surplus for July-December 2024, easing political risks and speculation surrounding the upcoming monetary policy decision by the State Bank of Pakistan (SBP).

The KSE-100 index reached the intra-day peak of 114,320 points before closing at 114,038, up 594 points. Cement stocks and foreign corporate buying played a significant role in the surge.

Analysts were closely watching the SBP's policy meeting, where expectations of a 100-basis-point (bps) rate cut were fuelling optimism.

Ahsan Mehanti of Arif Habib Corp commented that stocks showed recovery in an earnings season rally amid a drop of up to 41 bps in treasury bond yields and expectations of reduction in the industrial power tariff after the IMF's approval.

He added that upbeat data exhibiting a $1.2 billion current account surplus for July-December 2024, easing political risks and speculation ahead of the SBP policy rate decision played the role of catalysts in the surge at the PSX.

At the close of trading, the benchmark KSE-100 index recorded an increase of 594.36 points, or 0.52%, and settled at 114,037.79.

In its review, Topline Securities stated that the market saw a positive performance, with the index reaching the intra-day peak of 114,320 points before closing at 114,038.

Market sentiment was buoyed by recent foreign corporate buying while cement stocks remained in investors' focus, it said. Key contributors to the positive movement included Engro, Pakistan State Oil (PSO), Fauji Cement, The Searle Company and Maple Leaf Cement, which together added 309 points to the index, Topline added.

Arif Habib Limited (AHL) noted that the PSX had a choppy session where the KSE-100 traded on both sides of the fence before rallying in the last hour.

Some 57 shares rose while 39 fell with PSO (+3.24%), Fauji Cement (+5.37%) and The Searle Company (+4.2%) contributing the most to index gains. On the other hand, UBL (-1.07%), Fauji Fertiliser Company (-0.21%) and Meezan Bank (-0.32%) were the biggest drags, it said.

AHL added that cement and pharmaceutical names were the big outperformers, where Maple Leaf Cement (+4.87%), Citi Pharma (+9.04%) and AGP Limited (+3.98%) gained significant ground.

"Attention now shifts to Monday's monetary policy committee meeting; we expect a 100bps cut in policy rate to 12%. This level was last seen in March 2022," the brokerage house said.

Heading into the last session of the week, the KSE-100 was down 1.07% week-on-week. "Ideally, Friday's close towards 115k will bode well for a push higher next week."

JS Global analyst Muhammad Hasan Ather commented that the stock rally was mainly driven by robust buying in the cement sector and heightened expectations of a 100bps rate cut in the upcoming monetary policy meeting.

Falling yields in Wednesday's T-bill auction bolstered market sentiment, he said, adding that ongoing monetary easing would likely stimulate economic activity, increase corporate earnings and drive KSE-100 to new highs.

Overall trading volumes decreased to 675.5 million shares compared with Wednesday's tally of 743.6 million. Shares of 442 companies were traded. Of these, 213 stocks closed higher, 181 fell and 48 remained unchanged.

Cnergyico PK was the volume leader with trading in 143.7 million shares, gaining Rs0.57 to close at Rs7.93. It was followed by WorldCall Telecom with 78.2 million shares, gaining Rs0.09 to close at Rs1.79 and Fauji Cement with 47.2 million shares, gaining Rs2.07 to close at Rs40.65.

During the day, foreign investors sold shares worth Rs77.4 million, the NCCPL reported.