October 8, 2001	Monday	Rajab 20, 1422

THE Karachi stocks recovered from the three-year low last week as the mid-week rebound, triggered by strong buying at attractively lower levels on the blue chip counters, drove the bears out of the market, though temporarily.

The KSE 100-share index recovered from the early low of 1075 to finish well above the previous close of 1,141.20 points, up by 12 points. The market capitalization, which has dropped to Rs275 billion early in the week on massive selling in the pivotals recovered to close around the previous figure of Rs287 billion, a smart recovery judged by any standard.

The chief factor behind the run-up was a tangible change in the investor perceptions about the revival of the economy after the opening up of foreign aid pipelines, lifting of sanctions and hopes of debt write-offs. A virtual price flare-up, notably on the high-profile shares currently ruling at their bottom levels indicated that investors have altogether discounted the threat of the US attack on Afghanistan and resumed the normal trading activity. “It may not be the work of inspired bank-led buying”, analysts at the WE Financials believe, “something really positive may have occurred on the Afghan situation and that may be short of the war”.

The perception that there may not be war on the Afghan issue but the standoff will continue for sometime seems to have triggered buystops at the prevailing lows, they predict adding “the revival of economy after the inflow of foreign credit lines, lifting of sanctions and the rescheduling of loans was another supporting factor”, they add.

“Strange are the ways of the market to behave in typical conditions as it is pretty difficult to predict the general reaction to the given situations”, stock analysts at the Finex Securities say. After breaching through the 1,100 point barrier at 1,075.00, the KSE 100-share index staged a fine recovery led by the PTCL, the PSO and Hub-Power and cross it again to finish around 1,141.20 and recouping a major portion of the decline in the total market capitalization at Rs287 billion.

The strong weekend rally demonstrates that it could rise further and stabilize around the 1,200-point level for the near-term. The snap rally gave a pleasant surprise to everyone associated with the share business as it was contrary to the analyst predictions of a continued recession until the Afghan issue was resolved, although many still doubt its validity at a time when the war euphoria is at its peak.

All technical factors were in line with the bull perceptions but the external ones were against them as the bears could benefit from the lurking fear of the US attack on Afghanistan. Apart from the steep decline in the value of the dollar against the rupee, the other supporting factor was strong buying made by the banks and some financial institutions at the lower levels. “The inversely proportional effect of the decline in the value of the dollar finally materialized as the capital market could replenish from the proceeds”, stock analysts at the W.E. Financials predict.

“It is a remarkable recovery viewed in the backdrop of Afghan situation and the threat of US attack any time”, says a leading stock broker adding, “but don’t say investors chose to come back aided by the news of a strong aid package”. Bulk of the support originated from the institutional traders under the mechanism of market stabilization drive followed by a good bit of bargain-hunting on short-term basis. “Only fools could miss such an attractive lower levels achieved by the blue chips during the recent massive battering”, analysts say adding, the moping operation is, of course, fraught with high risks in case the Afghan situation turns more volatile”.

Most leading analysts believe the rally could well prove a spark in the clouded weather as despite good news on the foreign aid front investors may not take long positions as the threat of war looms large. Most of the leading shares finished recovered under the lead of the PSO, Pakistan Oilfields, Shell Pakistan and Lever Brothers, which recovered from the early lows, some other blue chips such as the ICI Pakistan remained under pressure and ended further lower on renewed selling. Other good gainers were led by the New Jubilee Insurance, Attock Refinery, the BOC Pakistan, Engro Chemical, Al-Ghazi Tractors and Gulistan Textiles which posted gains ranging from Re1 to Rs2. Losses on the other hand were mostly fractional barring the EFU General Insurance, Kohinoor Weaving, Din Textiles and some others.

Trading volume showed a modest rise at 211 million shares as compared to 185 million shares a week earlier, bulk of which was shared by the PTCL and the Hub-Power followed by the PSO and the Sui Northern. Other actives were led by the Fauji Fertiliser, Engro Chemical, Adamjee Insurance, the MCB, World Call Payphones, Nishat Mills, Dewan Salman,Ibrahim Fibre, and many others.

FUTURE CONTRACT: Forward shares also followed the lead of the ready counter and recovered smartly from the early week lows under the lead of the PSO, which attracted strong short-covering below the Rs100 level. The PTCL, Engro Chemicals, Hub-Power, Dewan Salman, Ibrahim Fibre followed them but bulk of the support remained confined to the PTCL and the Hubco, which proved to be the volume leader.—Muhammad Aslam.