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August 21, 2019

Stocks close highest in 55 sessions as valuations steal the show


August 21, 2019

Stocks on Tuesday made another big stride in a valuations-driven rally amid sentiment boosters in the shape of a likely international intervention on geopolitical front and an expected perpetuity of reforms and political stability following the extension in the tenure of the sitting army chief, dealers said.

Topline Securities in its market review said equities continued their positive momentum to close highest in last 55 sessions, while the index during last two days index had gone up by 5.75 percent.

“Investor sentiments remained high mainly on US President Donald Trump’s offer to intervene in Kashmir issue, which is expected to ease out the conflict, attractive valuation of stocks (market forward PE at 11-year low of 5x), and stability in global equity markets,” the brokerage said. Pakistan Stock Exchange (PSX) benchmark KSE-100 shares index gained 2.90 percent or 856.80 points to close at 30,419.22 points level. KSE-30 shares index followed suit with a low of 3.57 percent or 494.74 points to end at 14,347.63 points level.

Khurram Schehzad, economist and capital market expert, said the market had became one of the cheapest equity markets in the world, so investors were taking advantage of it.

“Also, with some macroeconomic stability in sight, stability in currency parity, improving current account deficit and foreign exchange reserves position alongshide expected reasonable growth in corporate earnings, have all compelled investors to invest back in equities,” Schehzad said.

Analyst Ahsan Mehanti from Arif Habib Corporations said stocks closed record higher amid speculations on likely resolution of Pak-India conflict after US president’s positive comments on trade, strategic partnership, and his expression of interest in helping defusing Kashmir tension.

“Upbeat financial results in banking stocks, foreign inflows, higher global equities, surging global crude prices, and rupee stability triggered the another stellar run at the market,” Mehanti added.

Saad Hashmi, executive director at BMA Capital Management said, “Going forward, an expectation of low current account deficit and the America’s offer to break the ice between Pakistan and India may extend the rally as the market has recovered with good volume”.

Faisal Shaji, Strategist at Standard Capital said the benchmark index rebounded as individuals were finally cashing in on equities available at a considerable discount.

Market is mainly propelled by individuals after touching a low of around 28400 on Monday, a major support level, Shaji said adding investors believed the market had already slashed 46 percent since a high of 52,800 in May 2017 and now it was the right time to march ahead for a rally.

“One prime reason of surge in market may be a possible resolution on short selling issue as per international norms,” Shaji said. The market staged a grand rally and the index at one time was up by more than 900 points and in two consecutive sessions index gained more than 1600 points.

Two such sentiment-boosting factors are: the share values have become quite cheaper and the extension of army chief for another three years, a leading analyst said.

The highest gainers were Nestle Pakistan, up Rs149.75 to close at Rs6130/share, and Indus Motor Company, up Rs43.12 to finish at Rs1049.23/share. Bank of Punjab recorded the highest volumes with a turnover of 10.364 billion shares, whereas the scrip gained Rs0.64 to end at Rs7.93/share.

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