KSE-100 gains 692 points pushed by energy stocks

Shares at the Pakistan Stock Exchange (PSX) opened in the green on Monday, with the benchmark index rising shortly after trading began. The KSE-100 index gained 692.26 points, or 1.75 per cent, to reach 40,361.46 points at 10:45am.

Analysts attributed the stock market’s rise to the government’s steps to reduce circular debt in the gas sector, including the formation of a committee led by the president of the Institute of Chartered Accountants of Pakistan Ashfaq Tola to suggest a way forward on debt settlement.

“The market has opened on a strong note, with the energy sector seeing buying interest. This follows recent news that the government is looking to address the circular debt issue,” Head of Equity at Intermarket Securities Raza Jafri said.

“There is also a feeling that the selling is overdone,” he added, referring to the stock market crash last week when the benchmark index lost over 1,900 points in three days. Jafri said the next trigger that could positively affect the market was expected inflows from Saudi Arabia that would boost the country’s foreign exchange reserves, which are at an eight-year low.

Meanwhile, Aba Ali Habib Securities’ Salman Naqvi cited media reports that the International Monetary Fund (IMF) has demanded the government come up with a viable plan to reduce circular debt in the energy sector to clear the much-needed ninth and tenth reviews satisfactorily.

“If the government manages to pay the significant receivables of [gas companies] through any means, it will greatly benefit PPL, OGDCL and PSO,” he commented, noting that the weighted average of these companies in the stock market was “high”. Shares of PPL were up Rs4.31 or 7.5pc at 10:35am and OGDCL’s at Rs3.62 or 4.96pc, while PSO shares rose by Rs6.89 or 5.2pc.

Naqvi said investors were also buying shares in other sectors that were already in the “oversold zone” last week. He cautioned, however, that the market’s gains were unsustainable as it was a rollover week, in which futures contracts are either settled or rolled over to the next month, and the country’s law and order situation was worsening.

First National Equities Limited Chief Executive Ali Malik said the gas, exploration and refinery sectors led the index upwards on expectations that the government would address circular debt and raise gas prices, which would increase profits and dividends.

Another reason was the perception that political instability would be reduced for a while after PTI Chairman Imran Khan said Punjab Chief Minister Chaudhry Parvez Elahi would dissolve the provincial assembly after taking a trust vote on Jan 11, Malik said. The PTI had previously announced to dissolve the Punjab and Khyber Pakhtunkhwa assemblies on Dec 23.

“Stocks [are] showing sharp recovery in the year-end rally at PSX on strong valuations,” Arif Habib Corporation’s Ahsan Mehanti said, adding that Imran’s statement has also eased political noise. “World Bank flood relief support approval of $1.7 billion, shrinking trade deficit and surging global equities and global crude oil prices played a catalyst role in bullish activity,” he said.