June 9, 2003	Monday	Rabi-us-Sani 8, 1424

Stocks maintained an upward drive during the last week as majority second-liners assumed the role of trendsetters on heavy dividend-related buying, thus relegating the blue chip volume leaders, including the PTCL and the Hub-Power to secondary positions.

Political standoff on the LFO issue took its toll both in terms of the volume and the price flare-up. The underlying sentiment at no stage showed signs that the current run-up was overdone as was reflected by the new records set up by the KSE 100-share index and the total market capitalization.

The pre-budget trading week as a whole failed to generate speculative buying despite some positive “budgetary leaks”. A section of the investor was worried over the political standoff on the LFO and its negative fall-out on the share business, if consensus was not reached on some issues.

Financial risks were much greater than the possible gains if one goes all-out for stocks, expected to be the chief beneficiary of fiscal incentives in the new budget. The rigid positions taken by the contenders of power could mean anything to the system including the budget. The opposition had already vowed not to allow a safe passage of the document if the LFO issue was not resolved on their terms.

However, all was not bad with the broader market. Both, the KSE 100-share index and the market capitalization set new all-time records after beating earlier ones almost in each session. Buying support lacked aggressiveness associated with the pre-budget speculative trading, it was there on a modest scale to add new dimensions to the statistical data.

The total market capitalization, for instance, soared well above the $1 billion mark slightly below the $2 billion figure at Rs697 billion. The KSE 100-share index was now eyeing its next target of 3,200 points. Both records reflect investors’ confidence despite a number of political constraints. It finally ended at 3,141.82 points.

A section of investors did cover positions at lower levels but the buying interest lacked aggressiveness associated with an ambitious sell-off programme of some mega state-owned units including the PTCL during the next three months. Surprisingly, there was no hint of the final bidding date of the PSO, which was fixed for April 26 but was postponed on the reported request of some foreign short-listed bidder because of the Iraq war.

The market was terribly weighed down by the negative fallout of the MMA’s softened stand on the LFO and the president’s uniform, after hopes of an imminent agreement between the government and the MMA proved false. Reports of some action against the MMA government in the NWFP further accentuated the situation.

However, the perception that the Privatization Commission will stick to its disinvestment programme forestalled panic-selling from the retailers and bargain-hunters, although fears over a big political showdown between the contenders worried the investors.

The KSE 100-share index should have risen sharply high on the privatization reports of the PTCL, the National Bank, the Sui Southern Gas, and the Oil and Gas Development Corporation, but negative news from the political front forced the bulls to play safe. It ended higher with a fresh gain of 4.62 points at 3,108.53.

“Four billion shares of the above companies which the PC intends to sell through bourses before Sept 30,2003 was a massive amount and could overwhelm investors and the market in just one go”, analysts said. They added that though the programme was expected to be well phased out but the three months’ time appears too short”.

Investors, financial institutions and brokerage houses will have to line up a lot of cash amounts to absorb the floating stocks of these companies, three of which were are listed on the stock exchanges and are actively traded.

“The biggest fear of the market could be whether or not it was capable of absorbing such a massive offloading of shares within the official timeframe”, brokers asked. “There were also fears of decline in the share values of other pivotals owing to oversupply, they added”.

Some analysts also fear the developing situation on the LFO front followed by reports of the MMA’s refusal to toe the official line and some official action by the centre against its government in the Frontier Province could take away the current steam out of the market.

“The current political set up may not may not be winded up in the face of strong opposition’s stance on the LFO and some other official actions.

All doors aiming at a political consensus on the current issues between the government and the opposition now seem closed and investors were now debating “what next”.

It was perhaps in this background that investors were in two minds about the developing situation and did not participate in the proceedings in a normal way and just played safe.

The Fazal Textile and Al-Ghazi Tractors led the list of top gainers followed by the HinoPak Motors, Dawood Cotton, Millat Tractors, Grays of Cambridge, Pakistan Paper Products, Packages, Jahangir Siddiqui & Co, Central Insurance, Pakistan Services, Lakson Tobacco and the Siemens Pakistan along with many others.

Losers were led by the Colgate Pakistan, Wyeth Pakistan, Al-Abid Silk, Reckitt and Benckiser, Clover Pakistan, Treet Corporation, Bhanero Textiles, and the Nestle MilkPak falling modestly.

FORWARD COUNTER: Barring the PSO, which finished modestly lower, on mid-week selling speculative shares on this counter performed well and in line with their counterparts in the ready section. The Hub-Power,the PTCL, and Nishat Mills and some other rose sharply amid large volumes on active support.—Muhammad Aslam