KSE-100 gains nearly 800 points on oil and gas sector reports

The KSE-100 witnessed a buying spree, which dragged the index from the red to the green zone in the early hours of trading, amid unconfirmed reports that the oil and gas sector’s circular debt was on the radar of authorities, and would be resolved.

A decrease of nearly 100 points soon became a gain of over 650 as the market became abuzz with screenshots of news channel tickers, relying on sources, that stated the incoming caretaker setup was keen on resolving the sector’s circular debt issue.

Intra-day trading soon witnessed a spike with massive buying interest in index-heavy OGDC, PPL, and SNGP shares.

Business Recorder could not verify the news reports.

At close, the KSE-100 Index was at the 48,227.60 level, an increase of 797.77 points or 1.68%. This is in stark contrast to Tuesday’s proceedings when the benchmark index lost over 950 points over profit-taking and consolidation of gains ahead of the dissolution of the National Assembly.

The development comes as investors lay in wait for resolution of the circular debt issue.

Talking to Business Recorder, experts said the reduction of circular debt was among the promises made by the outgoing government to the International Monetary Fund (IMF).

“The government’s fiscal cost would be zero under this scheme,” said Tahir Abbas, Head of Research at Arif Habib Limited.

“As the government itself is a major shareholder of these E&P companies, they would receive the amount in form of dividends,” he said.

“This will clear the companies’ bulging receivables, and will help reduce circular debt from Rs1.6 trillion to Rs1.2 trillion,” he added.

Meanwhile, others called for resolution of structural issues marring the country energy sector.

“The government is purchasing expensive imported gas, while selling it to domestic consumers on subsidised rates, which has created liquidity issues for E&P companies,” said Fahad Rauf, Head of Research at Ismail Iqbal Securities Limited.

“The core reason for this circular debt pile up is improper pricing of LNG, gas tariffs facing a lot of delays and distribution losses. There are structural issues which need to be resolved,” he said.

Rauf was of the view that the reduction of circular debt will improve E&P sector balance sheet, the shares of which remain undervalued.

Brokerage house Capital Stake in a report said the indices accumulated gains all day long while volumes shrank from last close.

Sectors adding gains to the benchmark included banking (175.53 points), oil and gas exploration (169.02 points) and power generation and distribution (131.95 points).

Companies that drove the index north consisted of, OGDCL, Hub Power Company Limited and Pakistan Petroleum Limited.

Volume on the all-share index decreased to 312.3 million from 336.1 million on Tuesday.

However, the value of shares traded increased to Rs14.3 billion from Rs12.5 billion in the previous session.

Oil & Gas Development Company Limited remained the volume leader with 37.7 million shares, followed by Pak Petroleum Limited with 22.8 million shares and JS Bank Limited with 21.6 million shares.

Shares of 337 companies were traded on Wednesday, of which 207 registered an increase, 111 recorded a fall, and 19 remained unchanged.