Bears enter the market to abort sustained bull-run
The KSE 100-share index last week breached through the psychological barrier of 2,300 points but failed to sustain it, as the bears moved in and indulged in massive weekend profit- selling.
The long-term market outlook appears to be bullish, although some leading analysts doubt about a safe passage for index beyond the 2,300 index level. This was reflected at its end at 2,294.63 points after having touched the career-best so far, and second best figure of 2,305 points. The highest-ever was 2,662 points in mid-90s.
Leading analysts are divided over the boom like conditions powered by higher corporate announcements and lure of handsome capital gains, as some among them term the current price flare-up not fully backed by an objective background from the political and economic fronts.
Others term it genuine as those who could peep through the future a little farther are building up long positions at current levels, not ruling out the possibility of technical corrections, here and there.
As a result, the stocks soared to new peak levels as investors were not ready to miss the rising market boosted by reports of a fresh US aid package, and higher interim working results of some mega companies, amid predictions of an extended bull-run beyond the 2,300-point index level.
The political standoff is there as the contenders of power, so far, have failed to reach a consensus on forming a government at the centre, but investors lured by higher interim profits of some leading companies, including the PTCL, the Unilever Pakistan, the Sui Northern Gas refused to sit on the sidelines — chief bait being the capital gains.
As speculated, the KSE 100-share index breached through the psychological barrier of 2,300 points but it was unclear at the weekend session whether or not it will resume its upward journey beyond that level. The net rise over the week was about 58 points or 3.5 per cent at 2,294.63 points and an increase of Rs14 billion in the market capitalization at Rs555 billion.
Leading analysts are, however, divided over current boom conditions as a steep rise in the index is not fully backed by objective conditions and appears to be speculative. But some others claim, the higher interim earnings, and an expected foreign debt waiver of $1 billion, massive privatization programme, which also includes the sell-off the PTCL and the PSO, appear to be chief stimulants fuelling the current bull-run.
The market, therefore, virtually witnessed a scramble for some leading shares after the announcement of higher earnings as the investors lured by handsome capital gains were not inclined to sit on the sidelines.
“I don’t think bears will be able to reverse the course of index before it breaches through its next barrier of 2,300 point”, predicts a leading analyst. “All supporting factors including political and interim results are combining to push it to that level”.
That could well mean, in financial terms, “it has gained about 40 per cent during the last one year, lifting the total market capitalization to Rs560 billion or $1.5 billion”.
“It appears to be a judicious blend of both strong institutional and foreign buying and when both re-enter, though on selected counters, there has always been a significant change in the market psychology”, brokers said.
The details about the sell-off of mega issues such as the PSO and the PTCL, shared with the KSE members by the chairman of the Privatization Commission on Thursday, seemed to have encouraged the investors to take new positions on these counters.
But what seems to have boosted market sentiments despite the political standoff was the perception that the government is firm on its privatization agenda, irrespective of changes at the centre, brokers said.
Reports of higher corporate earnings by some leading companies also generated a good bit of short-covering and speculative buying on the relevant counters.
Third quarter post-tax earnings by consumer giant, the Unilever Pakistan at Rs522 million, showing an increase of 60 per cent and Earning Per Share (EPS) at Rs39.3 (face value Rs50) reinforced the investor perception about the higher first-quarter earnings by other giants, notably the PTCL.
The PTCL board, which met on October 30, in Islamabad also announced higher first quarter revenue at Rs16.550 billion, showing after-tax profit of Rs5 billion and the EPS at 98 paisa as compared to previous 83 paisa. Both announcements were well- received in the market as was reflected by the heavy turnover and a sharp rise in their share values. The Parke-Davis followed them on an identical report about the profits.
The top gainers were led by Dawood Hercules, Siemens Pakistan, Pakistan Reinsurance Co, Parke-Davis and the PSO, Adamjee Insurance, HinoPak Motors, Millat Tractors, Engro Chemical, Cherat Papers, Ghani Glass, Bata Pakistan, Dawood Cotton and several others. But the Wyeth Pakistan and the Siemens Pakistan suffered sharp setback at the weekend session and ended with clipped gains. The losers were led by the IGI Insurance, Noon Sugar, Security Papers, Sarhad Cigarette, Gatron Industries, and several others, but losses were modest.
Trading volume soared to a record high of 1.592 billion shares owing to massive buying in the PTCL, the Hub-Power and the PSO triggered by the reports of higher earnings.
Other actives were led by the Engro Chemical amid rumours of bonus shares, the FFC-Jordan Fertiliser, the Sui Northern Gas, the MCB, the National Bank, the Adamjee Insurance, the Fauji Fertiliser, the Southern Electric, the ICP SEMF Mutual Fund, the Telecard, the KESC, Dewan Salman after the news of the IFC loan expansion of current production facilities and the Nishat Mills.
FORWARD COUNTER: Both, the PSO and the Engro Chemical remained under sustained bull-squeeze and closed sharply higher after having hit their circuit breaker levels.
But as volume leaders, the PTCL and the Hub-Power were leading, which rose on large turnover daily. The Sui Northern Gas, Dewan Salman, and some other also performed well.—Muhammad Aslam
