KARACHI: Snapping the three-day bearish spell on Friday despite mounting geopolitical tensions, the Pakistani stocks staged a surprise robust rally, tossing the benchmark KSE 100 index near 71,000.

Speaking to Dawn, Arif Habib Ltd Head of Research Tahir Abbas said the ongoing process to secure another bailout package was the key bullish factor as staying in the IMF programme would ensure the sustainability of meeting the country’s external debt repayment obligations and keeping the current account in better shape.

“Pakistan should stay in the IMF programme as it boosts investor confidence in the economic direction and places the country in a better position to deal with current account and debt management issues more conveniently as it would also open up inflows from other multilateral lenders and friendly countries fulfilling crucial financing needs,” Mr Abbas remarked.

He added that the government has been making all economic decisions on merit, fuelling bullish sentiments in the stock market.

More importantly, Mr Abbas said, the valuations of scrips are still highly attractive even though the benchmark index has crossed an unprecedented level of 70,000 during the current week.

“Historically, PSX maintains a price-to-earning (P/E) ratio of 6 against the current 4.2,” he said, explaining the P/E ratio is a benchmark that measures a firm’s current share price relative to its income per share.

The market has performed robustly in the last six months, surging almost 60pc. However, its P/E ratio is still attractive, so investors, especially foreign ones, continued across-the-board value-hunting.

Topline Securities Ltd Chief Executive Muhammad Suhail told Dawn that the news that Saudi Arabia moved closer to buying a $1 bn stake in Reko Diq triggered aggressive buying, taking the PSX to another record closing. Moreover, steady SBP forex reserves despite the $1bn Eurobond payment signalled that the external account is relatively better.

“Locals got huge cash liquidity after Rs6bn buying of Pak Suzuki shares by their sponsors and now it seems they are re-investing in other stocks,” he added.

Hub Power, Engro Fertilisers, Meezan Bank, Bank Al-Habib, and Oil and Gas Development Company made a major positive contribution to the index, cumulatively contributing 329 points.

Ahsan Mehanti of Arif Habib Corporation said the bullish trend is based on a strong earnings outlook and deliberation over privatising state-owned enterprises.

“The bullish trend is realistic owing to external account stability after reduction in current account deficit to $1bn for July-February FY24, falling CPI inflation to 20.7pc for March hinting SBP key policy rate cut in coming months,” he observed. He added that the surge in global crude oil prices amid geopolitical tensions and the finance minister’s ruling out significant devaluation with the IMF deal played a catalyst role in the record close.

Speaking to Dawn, Pak-Kuwait Investment Company Head of Research Samiullah Tariq remarked that the market rallies as economic conditions remain stable, the successful Eurobond payment and steady forex reserves, good financial results, and optimism regarding the new IMF agreement.

As a result, the benchmark KSE 100 index closed at 70,909.90 points after rallying 619.79 points, or 0.88pc from the preceding session.

The overall trading volume inched up 8.06pc to 475.83 million shares. However, the traded value fell 4.68pc to Rs23.22bn on a day-on-day basis.

Stocks contributing significantly to the traded volume included Pak Refinery Ltd (49.66m shares), Cnergyico PK Ltd (26.77m shares), Kohinoor Spinning Mills Ltd (22.83m shares), The Bank of Punjab (21.40m shares) and Air Link Communication (20.68m shares).

The companies registering the major increases in their share prices in absolute terms were Unilever Pakistan Foods Ltd (Rs200.00), Hoechst Pak (Rs97.49), Hallmark Company (Rs56.00), Nestle Pakistan Rs52.50) and Philip Morris (Rs45.00).

The shares registering the most significant decreases in their share prices in absolute terms were Rafhan Maize Products Company Ltd (Rs30.10), Service Industries Ltd (Rs9.50), Archroma Pakistan Ltd (Rs9.45), Sitara Chemical Industries (Rs6.00)and Al-Noor Sugar Mills Ltd (Rs5.48).

Foreign investors continued their buying spree by purchasing shares worth $5.69m.

Published in Dawn, April 20th, 2024

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