Institutional support gives leverage to KSE index, capital
By Muhammad Aslam
The KSE 100-share index, last week, breached the psychological barrier of 5,000 points. Analysts predict its next target could be the crucial figure of 6,000 within this year
, if all goes well with the current positive basic fundamentals - notably higher corporate payouts and active institutional support.
The historic level incidentally coincides with the second one-day victory by the Pakistan cricket team over the Indian team. Both feats require national celebration in more than one ways.
The meteoric rise of both, the index and the capital was beyond the perception of even the leading analysts, as still, many think that the price flare-up was speculative and not backed by any objective economic condition. But as investors have limited options to channel their savings, new flotations, attractive bait of capital gains, and higher dividend did not allow them to sit on the sidelines. Hence, the boom under the patronage of institutional traders.
"It is really a bonanza for small and genuine investors whose savings have increased manifold over the last two years in line with improving records by the index and the capital", brokers said.
It finally closed the week at 5,000.14 as compared to 4,915.14 a week earlier, up by 86 points. The total market capital also crossed the barrier of Rs1,300 billion at Rs1,311 billion, up by Rs24 billion owing to massive buying in the heavily-capitalized shares such as the OGDC, the PTCL and the Hub-Power.
During the last two years, it has breached the barriers of 3,000, 4,000 and now 5,000 points. Where would be the end is pretty difficult to predict, at this point. All basic factors including higher corporate earnings, cheap bank credits and strong genuine buying are there, needed for a bull market.
"I don't think bears have the capacity to rein in the bull monster at this stage as all basic fundamentals are in their favour", analysts said adding, "even a negative fallout of an Army operation in tribal areas failed to work as an immediate depressant".
During the last three years, it had risen by about 300 per cent after breaching the successive barriers of 3,000 and 4,000 and now 5,000 points on the strength of basic fundamentals and high return on investment in shares, than in any other investment.
All these years, credit by banks have been made cheaper, corporate earnings higher along with lofty rates of payouts. Only fools could miss the rising market supported by official confidence building steps.
Most leading shares participated in the market run-up, notably those whose board meetings are due this month on the rumours of higher dividend. Heavy physical activity, throughout the last week, speaks of the renewed interest being shown by some leading institutional traders at lower levels and market's sustained rise to new highs.
The market's buoyant mood was also well-reflected in the KSE 100-share index which is steadily inching up to its next target of 5,000 points. It was last quoted with an extended gain of 27.65 points at 4,979.86 as compared to 4,952.21, a day earlier.
The third one-day cricket match between Pakistan and India did not affect local stock trading, as had been during the Karachi match. However, reports indicate that punters remained active in favour of the Pakistani team.
Cement and energy shares have been under pressure for the last couple of sessions and had attained attractively lower levels. This ensured that handsome capital gains came in for strong covering purchases at the fag-end of the week on the market talk of higher dividend.
Institutional traders who have been a bit inactive for last couple of sessions resumed their normal daily operations and their lead was quickly followed by others, notably the punters.
"I don't think there will be any change in the market fundamentals even after the index level of 5,000 points, as the developing corporate scenario indicates of further rise after due technical consolidations", said an analyst. However, some analysts attach, too much importance to the visit of the US Foreign Secretary, Colin Powell, and his reported demands on nuclear proliferation.
"Success or failure of the Wana operation could also work on both sides of the market owing to the presence of allied forces on other side of the border", they feared.
Leading gainers were again led by Javed Omer, Parke-Davis, Siemens Pakistan followed by the IGI Insurance, Mari Gas, Bata Pakistan (after a dividend of 40 per cent), Grays of Cambridge, the BOC Pakistan, Nestle MilkPak, and Colgate Pakistan. Parke-Davis also rose sharply in its post-dividend (250 per cent) trading.
Auto shares also came in for active short-covering on reports of some favourable official decision on the import of reconditioned cars after their meeting with the high-ups in Islamabad last week.
The Al-Ghazi Tractors, Millat Tractors, Honda Atlas and HinoPak Motors and Pak-Suzuki Motors were leading gainers among them, up by Rs1.95-6.40. Losses on the other hand were fractional barring Ghandhara Diesel, Artistic Denim, Atlas Battery, Exide Pakistan, Pakistan Refinery, Shell Pakistan, Nestle MilkPak, Rafhan Maize Products, and some others.
FORWARD COUNTER: Leading shares on this counter also rose in sympathy with their ready section under the lead of the PSO, Dewan Salman and, Fauji Fertiliser, Engro Chemical, the ICI Pakistan and some others on active speculative support.
