Daily Times

Karachi: Pakistan equities, amid calming down political situation following Supreme Court’s decision towards smooth settlement on panama inquiry, registered highest ever increase of 1406.03 points in the KSE 100 index as investors’ positive sentiments helped market to rally to close above 40,000 level at 41,299 mark.

Stocks were higher at open on thin volumes on bets that a possible end to the crisis was likely given court’s pending decision despite ongoing crackdown and arrests of PTI’s workers and leaders. Market witnessed broad based sharp upward swing as Supreme Court assured swift investigation and decision on allegations related to Panama Paper while Imran Khan led PTI celebrated and called-off the shut-down of Islamabad (will now put a show of strength in Islamabad today calling it a “Thanksgiving Rally”), said Ali Raza, analyst at Elixir Securities adding that S&P upgrade and higher than estimated inflation were ignored as investors breadth a sigh of relief and struggled to grab onto any decent offers available on screen that pushed KSE100 index to a level that is a stone throw away from all time high.

“PTI chief protest call off after Supreme Court summons PM on Nov 3triggered late session rally in stocks across the board. Abraaj affirmation on strategic sale of K-Electric, strong corporate results in the fertilizers, oil and auto sectors played a catalyst role in record high close”, says Ahsan Mehnti, senior analyst.

Amid political turmoil in Pakistan the international credit rating agency Standard & Poor’s (S&P) announced rating upgrade of Pakistan from B- to B with stable outlook after a period of 7 years. Pakistan’s rating was upgraded previously in August 2009 from CCC+ to B-. “We are of the view that rating upgrade will likely bode well for market sentiments and will lead to reduction in Pakistan market discount to peers. Currently, Pakistan market is trading at PE of 9.2x, which is at a discount of 33 percent and 23 percent to MSCI EM and MSCI FM PE of 13.8x and 11.9x respectively, said analysts at Topline Securities.

Overall, volumes increased by 113 percent to 506 million shares, while value increased by 129 percent to Rs17.2 billion/$165 million. On Monday 238 million shares worth Rs 7.5 billion/ $72 million were traded at the local bourse.

K-electric topped the volume leaders list with 41 million shares followed by Bank of Punjab 28 million, 1st Dawood Bank 22 million, SSGC 17 million and WorldCall Telecom 16 million. The index declined by 1.6 percent in the outgoing month, October, driven primarily by sell-off instigated by non-institutional investors where individuals offloaded a cumulative $48 million worth of shares. Interestingly, foreigners turned net buyers in October 2016 compared to net sell of $41 million in September 2016 with major support to the index provided by institutional investors. However, volumes contracted by 20 percent MoM to average at 449 million shares during the month as investors took to sidelines amidst rising political uncertainty. The outgoing month contained several corporate announcements/developments that included Abraaj announcing a “definitive agreement” between KES Power & Shanghai Electric for divestment of its 66.4 percent stake in K-Electric at Rs 10.1 per share, notification by HUBC of a possible scaling back of its expansion project to 660MW from earlier planned expansion of 1320MW, LUCK going through with its coal power plant albeit with modification to reliance on local/imported coal, SHC’s ruling in favor of Engro against the GIDC Act 2015, which is likely to be challenged and is unlikely to have a bearing on gas prices in our view, said report by Elixir Securities.

Market experts predict that the rally will continue as politics takes a back seat in days to come with KSE100 index likely cruising pass 43,000 on buying led primarily by retail and local institutions.