Stocks rebound 1.8pc as inflation data fuels rate cut bets

Stocks soared over 1,200 points on Friday, snapping a three-day losing streak, as lower-than-expected inflation data fueled hopes for a potential interest rate cut, dealers said.

The Pakistan Stock Exchange's (PSX) benchmark KSE 100-share Index increased by 1,244.45 points or 1.76 percent to close at 71,902.09 points. The highest index of the day remained at 71,986.43 points while the lowest level was recorded at 70,671.72 points. The KSE-30 index increased by 360.77 points or 1.55 percent to 23,594.85 points.

“Stocks closed bullish led by scrips across the board amid upbeat data for Consumer Price Index inflation at 17.3 percent year-on-year in April, likely to ease SBP policy and government target to hike PSDP by 27 percent to Rs1.2 trillion for FY25," said analyst Ahsan Mehanti at Arif Habib Corp.

He said that rupee recovery, government deliberations over privatisation of SOEs and speculations ahead of International Monetary Fund new loan talks played a catalytic role in a record close.

Traded shares increased by 12 million shares to 452.155 million shares from 436.993 million shares. The trading value rose to Rs24.542 billion from Rs19.024 billion. Market capital expanded to Rs9.797 trillion against Rs9.657 trillion. Of 378 companies active in the session, 248 closed in green, 104 in red and 26 remained unchanged.

Nabeel Haroon, an analyst at Topline Securities, said the positivity in the market can be attributed to news that a 50-member Saudi team will arrive for investment talks on next Sunday. "Weekly inflation that came in at one percent week-on-week lower for the week ending May 2, 2024 provided further stimulus to the market, as investors came in to accumulate cyclical stocks on lower inflation numbers," Haroon said.

The highest increase was recorded in Unilever Pakistan Foods Limited shares, which rose by Rs240.83 to Rs19,379.98 per share, followed by Nestle Pakistan Limited, which increased by Rs100.11 to Rs7,585.11 per share. A significant decline was noted in Hallmark Company Limited, which fell by Rs68.03 to Rs994.94 per share, followed by Shahmurad Sugar Mills Limited, which closed lower by Rs24.61 to Rs550.38 per share.

Analyst Muhammad Rizwan at Chase Securities said that after experiencing a downturn in the previous session, the PSX exhibited remarkable resilience, driven by a resurgence of bullish sentiment. "The session commenced on a strong note, with bullish momentum dominating throughout the day."

The standout performers were the Oil and Gas Exploration sector, spearheaded by PPL and OGDC, which propelled the market rally by contributing 346 points out of the total gain of 1,244 points. Other sectors also made significant contributions, with commercial banks adding 174 points, and the combined efforts of cement, power, and fertilizer sectors contributing 386 points to the index.

"The market was buoyed at the onset by news of an upcoming visit by a Saudi investor, fuelling investor confidence and leading to substantial positions being built in PPL and OGDC," Rizwan said. "This optimism was further bolstered by positive developments surrounding the Reko Dig deal with Saudi investors."Additionally, the cement sector saw robust activity, propelled by anticipation of a downward trend in inflation numbers in the upcoming CPI release, potentially ranging from one percent to 6 percent.

Looking ahead, the prevailing momentum is expected to persist as investors anticipate potential investments from Gulf Cooperation Council (GCC) countries. Moreover, successful negotiations for a new program with the IMF are anticipated to instil further confidence in the market.

Pak Petroleum remained the volume leader with 26.658 million shares which closed higher by Rs7.73 to Rs124.33 per share. Hascol Petrol followed it with 26.575 million shares, which closed higher by 70 paisas to Rs8.06 per share.

Other significant turnover stocks included Fauji Cement, Pak Elektron, K-Electric Ltd., Oil & Gas Dev., Pak Refinery, WorldCall Telecom, Air Link Commun and D.G.K. Cement. In Future Market, 334 companies recorded trading, of which 255 increased, 72 decreased and 7 remained unchanged.