Stocks turned in a highly volatile performance last week as investors played on both sides of the fence in the absence of strong support from the institutional traders and some leading bulls.
The market literally danced to the tune of conflicting rumours, which kept pouring in quick succession, never allowing investors to take long positions on any of the counters.
What seems to have halted the market’s upward drive to the index level of 3,000 was the rumours that the central bank is putting ceiling on bank investment in shares followed by tax on dividend income and the UN inspection whether or not Pakistan posses chemical weapons.
The combination of negative news and market’s highly overbought position prompted a lot of profit-selling on the overvalued counters, but analysts said the current run-up is not overdone and the market will be up again after meeting its technical demands.
Both the KSE 100-share index and the total market capitalization reacted to finish at 2,859.31 and Rs627 billion after touching their career best levels at 2,967 and Rs651 billion, respectively. The net loss over the week was 76.08.
The second interim dividend of 30 per cent by the PSO, and higher earnings by the ICI Pakistan and Sui Northern reported at the weekend session allowed the market to finish partially recovered from the mid-week lows and so did a cash interim of 40 per cent by Dawood Hercules.
There are more than one positive news on which the market could sustain its upward thrust. Peace talks offer by India, reports of higher corporate earnings from some of the leading companies and falling bank interest rates are some of the instant stimulants, which could sustain the current run-up.
The central bank proposal to limit the banks equity investment did cause the market crash on Tuesday when the index plunged by 3.5 per cent but the subsequent clarification by it again lured bulls into the arena.
The central bank is discussing a proposal to put a ceiling on bank investment in shares to five per cent in individual scrips and 20 per cent to their capital base in a year. The rumour virtually caused the market crash as financial traders hastened to liquidate their long position despite clarification by the central bank that one year time will be given to banks if the proposal was finally okayed to put ceiling.
“I feel banks are still unsure about the central bank moves to line up more funds for industrialization rather than stock trading,” one broker says, adding “their absence from the market at the fag-end of the week was fully reflected of these fears.”
Selling at the inflated levels stimulates fresh buying by way of consolidation of the earlier netted gains and in market parlance it adds to the market strength rather. Earlier, after several abortive attempts, the KSE 100-share index finally managed to surpass its previous all-time peak level of 2,955 on heavy buying in most of the pivotals aided by India’s offer of talks to resolve the outstanding issues between the two neighbours.
“It could be the decisive forward thrust to the coveted index level of 3,000,” predicts a leading stock analyst. “The gap of 33 points could be bridged aided by the massive surplus liquidity but mid-week selling halted its upward drive.”
However, on that eventful day it briefly touched the day’s highest bid at 2,990 but failed to sustain it or breach through the barrier of 3,000 as widely speculated during the January boom conditions.
The general perception is that the index is heading to cross the barrier of 3,000 points possibly during the current session, of course, after due technical corrections. There is, however, a loud whispering, “once the rubicon is crossed supporting factors and bulls’ stake will sustain it beyond this level.”
The peace feelers from the Indian high-ups and their willingness to hold talks to resolve the outstanding issues through peaceful means seem to have given the much-needed boost to a market weighed down by the local political standoff on the LFO issue,” analysts said.
On the corporate front, the last week of the current month is very important for the future direction of the market as board meetings of about 100 companies, including some MNCs and big local ones, are due and predictions of handsome payouts continue to inspire fresh buying from all and sundry.
“Most of the blue chips may not have yet reached the saturation point and still have the potential to rise further but major shift in investors’ buying and their newly found interest in the second-liners could give new meaning to the stock trading in the coming sessions,” predicts a leading analyst.
After several months odds gains were recorded in some of the leading shares as some of the contenders were not inclined to allow further price movements in them for some technical reasons. The Central Insurance, the IGI Insurance, and the Dawood Hercules were leading among them.
The Wyeth Pakistan and the Pakistan Refinery topped the gainers, up Rs53.25 and Rs12.75 followed by the IGI Insurance, the Siemens Pakistan and the Burewala Textiles and several others also posted sharp gains amid active trading.
The broader list was also strewn with sharp gains in some other pivotals, notably the Central Insurance, the Artistic Denim, the Noon Sugar, the Lakson Tobacco, the Attock Refinery and the National Refinery and despite mid-week selling the on- balance close was steady.
Trading volume fell below a billion share mark after several weeks as leading bears held on to their positions, off at 991 million shares as compared to 1.050 billion shares a week earlier.
The Hub-Power, the PTCL, the PSO, the Sui Northern Gas, the Pak PTA, the FFC-Jordan Fertiliser, the PIAC(A), the Dewan Motors, the National Bank, the MCB, the D.G. Khan Cement, the Bosicor Pakistan and several others were leading among them.
FORWARD COUNTER: Despite weekend recovery, leading speculative shares ended lower owing to mid-week selling and finished lower under the lead of the PSO, the PTCL, the Hub-Power, the Sui Northern Gas and the FFC-Jordan Fertiliser.—Muhammad Aslam
