March 24, 2003	Monday	Muharram 20, 1424

The stocks last week confidently crept back to their pre-reaction levels as bulls flooded the market with buystops at the prevailing rates after an attractive bait of capital gains overshadowed the negative side of the Gulf war.

“Bulls seem to be awaiting the US invasion of Iraq after having been in two minds prior to the attack in view of the uncertainty involved and once reports came in they flooded the market and rode the bandwagon,” says a leading analyst.

But small investors and jobbers are still undecided as they could not fathom the rationale behind the outstanding post-attack performance of the market and asking each other “whether the price flare-up is genuine or inspired,” he adds.

Despite a spectacular rise during the post-attack sessions, reminiscent of boom conditions, opinions are still divided over the direction of the market as analysts failed to find more convincing reasons behind the price flare-up excepting capital gains or higher dividend yields.

However, the US attack on Iraq at the fag-end of the last week seems to have given a green signal to the investors to cover positions at the dips amid predictions that the war may be short and result-oriented, but analysts warned them to play safe and not ride the bandwagon on false assumptions.

The Rubicon has at last been crossed with which the dilemma of “war or no war faded into history”. Investors were free to play to the tune of their own perceptions. The fading light on the war theatre could be as deceptive as the tall claims of victories by the contenders. The market’s buoyant response to an end of the uncertainty about the Iraq situation is also well-reflected in the steep rise in the KSE 100-share index, which soared about seven per cent or 165 points at 2,652, adding Rs13 billion to the market capitalization at Rs579 billion.

The initial reaction, however, demonstrates that the market seemed to have discounted the possible negative fallout of the US attack on Iraq on the local economy, but those who could foresee the ravages of war say the situation is fraught with high financial risks and needs objective analysis.

“The uncertainty over the Iraq situation was now over after the US air attacks on Iraq,” leading stock analysts commenting on the market’s outstanding performance said. “The perception that the end will be quick induced punters and speculative traders to cover positions at the prevailing lower levels.” However, it appears to be an initial thinking on the outcome of Iraq war and is essentially influenced by the rallies on the European and Asian markets. However, despite heavy odds against Iraq the end may not be that swift and according to the US calculations.

“Iraq seems to be in a defensive mood and how it will respond to the US air attacks in the coming days will set the future course of war and its impact on the foreign trade,” brokers said, adding “there is, therefore, a need to be a bit cautious before jumping to conclusions.”

Bulk of the support originated from the cash heavy financial institutions and institutional traders but general investors thought twice before riding the bandwagon, a leading stock analyst said.

“I still believe the snap rally could be deceptive as it is not backed by the objective conditions,” another analyst said, adding “in war situations set targets are seldom achieved as anything could happen in between.” Moreover, the sharp increase in the index did not reflect the performance of the broader market.

Both the PTCL and the Hub-Power, which together hold a weightage of 43 per cent in the index, have risen by Rs2.50 and added about 50 points to it alone followed by the PSO. An increase of one rupee in their prices adds 16 points to the index.

There is a loud whispering in the corridors of the KSE that some big ones are trapped in the phenomenon of overbought positions on selected counters at the inflated levels and are trying to get out of the impasse after pushing prices higher.

Nobody could deny the fact that there is a lot of surplus liquidity around owing to lower carryover business and dividend yields are attractive enough to re-plough idle money but if the Iraq war takes a negative turn, its impact on the world economies may not be that easy to absorb.

Leading index shares, notably in the energy sector and some textile scrips as well as MNCs led the market advance as investors covered positions in them at the lower levels.

The Shell Pakistan, the Shell Gas, the Unilever Pakistan, the Dawood Hercules and the Siemens Pakistan were leading among the gainers. They were followed by the textile and energy shares, including the 4th ICP, the Adamjee Insurance, the Bhanero Textiles, the Blessed Textiles, the Faisal Spinning, the National Refinery, the Pakistan Oilfields, the General Tyre, the Honda Atlas, the Fauji Fertiliser, the Packages and many others. Losers in most of the cases recouped their earlier fall.

Trading volume showed a modest increase at 700 million shares, bulk of which went to the credit of Hub-Power, the PTCL, the PSO, the Sui Northern and the FFC-Jordan Fertiliser. They were followed by the Engro Chemical, the Fauji Fertiliser, the Pak PTA, the Dewan Salman, the MCB, the National Bank, the Pakistan Oilfields, the ICI Pakistan and several others.

FORWARD COUNTER: After an initial weakness owing to uncertainty over the Iraq situation, speculative traders enter the market in a big way after the US attack and made massive covering purchases in the PTCL, the Hub-Power, the PSO, the Sui Northern Gas and some fertiliser shares.

Some of the leading shares finished around their circuit breakers owing to steep rise during the last two sessions of the week in line with their counterparts in the ready section.—Muhammad Aslam.