The benchmark KSE-100 index increased more than 1,000 points during the intra-day trading session on Friday and closed the day at 44,431 points (up by 679 points) on news flow suggesting that government is going to settle Circular Debt payments to Independent Power Producers and PSO.
Bullish sentiments were seen in independent power producers (IPPs) and the state oil marketing company PSO (Pakistan State Oil). Massive volumes of 63 million traded in Power generation sector while 61.9 million shares traded in Oil Marketing Segment. In IPP Sector, HUB Power, KAPCO, PakGen Power, Nishat Chunian Power all hit Upper circuit. While Pakistan State Oil (PSO) also hit the upper cap as the resolution of Circular Debt will have the largest impact on PSO.
As per the market news, Government is expected to release Circular Debt payments of Rs. 450 billion in three equal payments in January, June and December-2021. The government will also continue with a step-up increase in Electric Tariff to settle Circular Debt issue once for all.
As per the mechanism agreed between Government and IPPs, One-Third of the total payment will be released in cash while rest of the payments will be settled through government guaranteed Bonds. Government will hold meetings in coming week to finalize the process.
OMCs and Power sectors are expected to remain in limelight in coming week and will keep the Index energized.