Bears unsuccessful in aborting the bulls’ hierarchy
Despite the weekend pruning on blue chip counters, the stocks maintained their upward drive as bulls were not inclined to entertain the bearish ideas at this stage and continued to build long positions at the inflated levels.
In the process a number of leading shares reached near their ceiling rates, and some even breached through their circuit- breakers. This was due to the sustained price flare-up on the strength of strong institutional support.
Both, the KSE 100-share index and the market capitalization settled partially lower after establishing their new career-best levels at 4,542 points and Rs989 billion — only Rs11 billion short of the coveted figure of Rs1,000 billion.
The leading shares and the second-liners, both witnessed an avalanche of buying offers earlier in the week at lower levels from all the quarters. This was triggered by the reports that the MMA and the government are close to an understanding on the contentious clauses of the Legal Framework Order and the consensus package would be presented in the Parliament.
The massive weekend selling in some of the pivotals allowed the index to finish with clipped gains after touching its career- best level of 4,542 points. The crossing of the index at 4,500 points signals that the best is yet to come, provided a consensus on the LFO issue was reached. It ended at 4,461.47 points, up about 80 points over the previous week’s close.
The board meetings of some of the leading companies, including the Pakistan Oilfields, the Hub-Power, the ICI Pakistan and some others during the next month, appears to be the chief driving force behind the current dividend driven-rally and so was the unfolding of the privatization programme during the next couple of months. The PSO, the HBL, and the partial (3.5 per cent) liquidation of the NBP shares.
The buying euphoria was so strong that it pushed both the KSE 100-share index and the market capitalization at their new career-best levels of 4,5120 points and a coveted mark of Rs989 billion, respectively at one stage before the weekend profit- taking clipped in part some of the initial gains from both.
“The perception of return of sanity to the political scene after a deal on the LFO may be elusive as the MMA alone could not speak for the entire political spectrum, notably the mainstream parties”, said the PPP and the Nawaz League analysts.
It may well prove a trap for the MMA to rope them, they fear adding that for the last several month both have met many times but without any deal on the LFO and on President’s uniform.
The bulls were massively beaten after the blasts in Mumbai and were in search of excuse to outwit the bears.
The market’s meteoric rise of 60 per cent during the last couple of months demonstrates that the LFO controversy has become a non-issue for the investors as they were relying on the basic fundamentals, including the higher dividend and the capital gains.
But whether or not the sustained run-up was mandated by the objective economic conditions was debatable and considered beyond the realm of speculative trading.
The Mumbai bomb blasts and the killings reflected that the market was playing on a weak wicket and could be manipulated by the negative external developments.
However, an attractive bait of capital gains never allowed the investors to sit on the sidelines and hence the boom conditions erupted.
The early correction was, however, mild and did not cause major changes in the ruling prices of most of the overvalued shares — thanks to the presence of selective support.
After the mid-week, the KSE index resumed its upward drive rising well above the barrier of 4,400 points but active profit- selling towards the fag-end of the session by both — few leading punters and the weakholders — pushing it down to 4,381.99 points during the early week sell-off.
Most leading shares, including the PTCL, the Hub-Power, the PSO and others bounced back after passing through early week technical correction and a good number of second-liners also maintained their upward drive under the lead of cement, chemical and textile shares.
During the early three sessions, investors appeared a bit hesitant to probe new highs above the crucial index level of 4,400 points and resorted to selling when the 4,400-point level was crossed, brokers said adding”, it may not be the end of the speculative rise as some more encouraging dividend news were in the pipeline”.
But some others believed that the market had already entered the danger zone after it crossed the index level of 4,000-point and it may encounter a big sell-off any day in the form of technical correction.
Bulls, who have taken long positions on the selected counters at highly inflated levels may not allow the bears’ attempt to tilt the price balance in their favour at least for near-term, said a leading stock analyst.
With massive amounts of liquid cash floating here and there
investors are finding their way into share business in the absence of other attractive modes of gainful investment, and bulls have reasons to be optimistic, he said.
“Only some big negative news from the political or the economic front could cause major dents in the prevailing price structure”, brokers said adding, “the row over the LFO was there for the last couple of months but investors seemed to have digested its negative fallout”.
After the initial weakness, plus signs dominated the list as the leading shares and posted fresh gains under the lead of the Aventis Pharma, the Glaxo-SKF, the Lakson Tobacco, the PSO, the Shell Pakistan, the Shell Gas, the Indus Motors, the Millat Tractors, the Pak-Suzuki Motors and Javed Omer, which rose sharply on strong support.
Other notable gainers were led by the Dreamworld, the BOC Pakistan, the Shezan International, the Gillette Pakistan, the Pakistan Refinery and the Pakistan Cables.
Losers were led by the Wyeth Pakistan, off Rs150 followed by reports of omission of the interim dividend, the Island Textiles, the Pakistan Reinsurance Co, Al-Abid Silk, the Attock Refinery, the Atlas Battery, the Atlas Honda, the Packages, the Siemens Pakistan and many others.
Trading volume was maintained on the higher side thanks to massive buying in the Hub-Power and the PTCL, which turned out large-single session turnover.
The PSO, the FFC-Jordan Fertiliser, the Sui Northern Gas, the Pakistan Oilfields, the KESC, the Chakwal Cement, the MCB, the Bosicor Pakistan, the National Bank, the Lucky and the D.G.Khan Cement, the Pak PTA, the Fauji Cement and several others were also actively traded.
FORWARD COUNTER: The speculative issues on the forward counter showed mixed trend amid alternate bouts of buying and selling. While the Hub-Power and the PSO fell on the renewed selling, the PTCL, the Sui Northern Gas, the MCB, the Engro Chemical, the Fauji Fertiliser and the FCC-Jordan Fertiliser managed to finish modestly higher amid active trading.—Muhammad Aslam
