May 17, 2003	Saturday	Rabi-ul-Awwal 14, 1424

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KARACHI, May 16: After trading around the 2,950-2,979 level for 12 sessions in a row but failing to cross over the 3,000 barrier, the KSE-100 index did finally manage to accomplish the feat on Friday.

In a spurt of sharp rally, the index closed the day’s trading at 3,003.35 points, which is the new highest-ever level and represents nearly 11 per cent gain since January this year.

The Karachi stock market, which had posted a spectacular rise of 112 per cent in 2002 and secured for itself the position of ‘best performing market in the world’, has been dominated mostly by the bulls in the current year so far. Most analysts agree that what the market is witnessing is a “liquidity-driven rally, spearheaded by institutions who view equities as the most attractive investment option due to its double-digit yield.”

Market gurus are now arguing whether the index would keep climbing or be pulled back below the three-and-three-zeros level.

Opinion is divided. Moin M.Fudda, the managing director of the Karachi Stock Exchange, is ‘cautiously optimistic’ that the rally would sustain. He told Dawn that the earlier rally of January did not sustain because it was sparked mainly by the badla business.

“Compare that position with today’s,” he says.

In January, the COT or badla investment was a huge Rs16 billion; volume was as heavy as 500 million shares and the badla rates had skyrocketed to 50 per cent. By contrast, badla investment is now just Rs8.6 billion, volume is down to 185 million shares and the rates are at rock bottom 5-8 per cent.

Many analysts agree that at least on the face of it, the leveraged position is far lower than in January, which means there is more genuine long-term buying. Analysts say that financial institutions with loads of cash have nowhere to park it. One year T-Bill rates are down to 2.6 per cent; 10-year PIBs give out 5 per cent and the latest TFCs offer no more than 6-7 per cent in secondary market. Institutions are also barred from investing in NSS, which even otherwise are in the grip of downward revision in rates. On average, equities, therefore, still offer the best 10 per cent yield.

The KSE MD has all the nice things to say about the policies of federal finance minister for giving a firm direction to the economy; the SBP for sound monetary policy and the regulator SECP for corporate governance measures, including the directive to issue quarterly accounts.

He also takes a slice of credit for the bourse’s measures of risk management, capital adequacy; cap on badla rate at 18 per cent; and undisclosed trading, all of which he claims have contributed to the index’s push beyond the 3,000 mark.

Analysts affirm that the LFO, relations with India and law and order are factors that can set the medium-term direction for the market. But for now, everyone at the market is patting each other on the back for having carried the index above the coveted 3,000 mark. And this may have happened timely enough for Prime Minister Jamali to describe it as a fruit of democracy, when he comes down to the stock exchange to distribute top 25 companies awards early next week.