October 22, 2001	Monday	Shaba'an 4, 1422

POSITIVE news, following in quick succession, put the Karachi stocks on sound footing last week as investors continued to build long positions till the fag-end of the previous week amid predictions that the current price flare-up will continue.

What had been more important was the six per cent or the 73-point increase in the KSE 100-share index; well above the resistance level of 1,250 points which added about Rs14 billion to the market capitalization at around Rs313 billion.

The spectacular rise in the index has reinforced the investor-perceptions that the market is capable of discounting the likely negative impact of the Afghan war on its future outlook, stock analysts at the W.E. Financials feel.

The rally was initiated on the withdrawal of cases against the Hubco, followed by the approval of 17 per cent interim dividend by its lenders and the hopes of a good final triggered buystops in it, as the investors were not inclined to miss it at the prevailing rate of below Rs20, they added.

The market, therefore, sustained the early buying euphoria created by the visit of the US secretary of state Colin Powell but he failed to announce any financial relief to the Afghan war hit economy as widely speculated, as his briefcase had a political and military agenda rather than foreign debt write-off order. The KSE index was up by six per cent over the week, a smart rally aided by the perception of a continued bull-run.

However, some good corporate announcements and the presence of strong foreign fund and local institutional covering purchases did not allow the bulls to lay their guard and they did not look back after having treaded the recovery path.

The market sentiment was partially influenced by local strikes and procession against the US attacks on Afghanistan and the reports of tension on the international borders, including the cross-firing between the Pakistan and Indian border security forces but there was no scare among the investors, analysts at the Finex Securities say.

The market’s upward drive was so strong that it discounted the threats from across the border as analysts ruled out the possibility of any major border clash owing to strong presence of the US war machine in the area. The index has risen by about 150 points or 16 per cent during the pre-Powell and post-Powell visit, signalling that the lean period may be over after the opening of floodgate for the inflow of dollar. The market’s upward drive was further intensified by some positive corporate announcements from the Hubco and the PSO and credible performance turned in the by textile sector followed by the reports of 15 per cent increase in textile export quota and a customs duty waiver by the European Union.

Most of the sluggish textile shares rose in unison under. The perception that export losses because of Afghan war may be in part compensated induced investors to take new positions on this counter at the prevailing lower rates adding to the strength of the underlying sentiment. The massive daily activity in Hubco followed by the reports that its lenders have approved the interim dividend of 17 per cent again featured on the stock market trading, as it evoked a broad-based rally on other selected counters.

Market talk that the approval has paved the way for the final dividend which could be of any amount triggered buystops in its share at the lower levels. Its previous final dividend was 70 per cent. The final payout at the rate of 60 per cent by the Pakistan State Oil (PSO), making the total to a maintained 100 per cent seems to have fallen below the market expectations as was reflected by the late selling in its share. The late selling was caused owing to the omission of the bonus shares, which the investors were expecting at the rate of 20 per cent.

However, reaction in the PSO appears to be more speculative than real, as the 100 per cent cash dividend or Rs10 on a 10-rupee share is a fair return for the investors or those who have a stake in it, says a leading floor broker.

The PSO sales for the year ended June 30, 2001 soared to an all-time high of Rs143.306 billion from the last year’s comparable figure of Rs102.466 billion, showing a big increase in its market share of petroleum products. Stock analysts said although the rally was broad-based, the major investor-interest remained confined to the two pivotals for obvious reasons including the rumours of a dividend.

“Both shares, still ruling far below their pre-reaction levels have the potential to rise at least to their former peak on the strength of their working results and that is perhaps why investors are covering positions at the lows”, they added. Plus signs dominated the list under the lead of Adamjee Insurance, Gadoon Textiles, Sapphire Fibre, Sapphire Textiles, Suraj Cotton, Glaxo-Wellcome and Millat Tractors. Other leading shares, which rose included A.A.Textiles, the BOC Pakistan, the ICI Pakistan, Cherat Paper, Treet Corporation, Javed Omer and Mitchell’s Fruits.

Barring Attock Refinery, Pakistan Oilfields and the PSO, which fell sharply, losses were fractional and reflected lack of support rather than the large selling.

The speculative issues on the forward counter also followed the lead of their counterparts in the ready section but much of the activity remained confined to the Hub-Power and the PTCL. The trading volume maintained the higher side thanks to massive activities in the Hub-Power and the PTCL, which together accounted for 70 per cent of the total of about 700 million shares.

Other actives were led by the Sui Northern, the PSO, the ICI Pakistan, Engro Chemical, Fauji Fertiliser, Nishat Mills, Adamjee Insurance, Bank of Punjab, Dewan Salman and several others.—Muhammad Aslam.