Stocks resumed their upward drive during past week after dust on the political front settled down and investors, though unwillingly
, digested negative fallout of the Capital Value Tax (CVT).
A massive recovery of 247 points and Rs64 billion, both in index and market capital, reflected the market's coming back on tracks. Change at the top level, it is widely speculated, may lead to a better market.
Stocks recovered most of the post-budget losses as investors, led by the institutional traders, resumed their new account buying at lower levels. This aided the perception of political stability and positive economic fundamentals.
"The new setup is in place after swearing-in of Chaudhry Shujaat Hussain as the new Premier", analyst said adding, "this indicates a smooth sailing on the political front".
Reports that the Finance Minister Shaukat Aziz would replace Chaudhry Shujaat Hussain after few months sent waves of optimism in the business circle, notably in shares' said some analysts. Shaukat aziz despite taxing the share trade is known as an investment-friendly finance minister".
The market's exuberant reaction on his nomination as a future Premier is well-reflected in the performance of the KSE 100-share index. It breached through two consecutive barriers of 5,200 and 5,300 points during the week as investors covered their positions in an oversold market.
It finally was quoted around 5,352.70 points as compared to 5,105.69 points a week earlier, showing a massive recovery of 247 marks or five per cent. Total market capital also soared by Rs64 billion at Rs1,440 billion from the previous Rs1,376 billion as leading base shares recovered from their previous lows.
Exit of Zararullah Khan Jamali played no relevance to top level political change as investors flooded the market with buystops, adding Rs45.324 billion to the market capital at Rs1,421 billion.
"It was a red carpet welcome to the future prime minister", an analyst commenting on the market's sharp rebound said, "punters seemed to have digested the levy of new taxes including the CVT just in one go".
The bulk of support, which was confined to leading base shares reflected that a good part of massive buying may be "inspired", said some while others claimed that the long-term implications of the change could be negative. But the rally was exceptionally broad-based and covered all sectors, although energy and auto shares were in the forefront of leading gainers.
After initial euphoria fades out there could be some rethinking on the whole issue but it appears certain that from now on the market would be guided by the course of political events in Islamabad rather than some economic fundamentals, they added.
Heavy short-covering in the OGDC, which was marked up by Rs7 at Rs67 was the chief contributor to a sharp rise in the index as a gain of one rupee in it adds 20 points in the index. It alone added over 100 points to the total.
The perception that the investment-friendly economic policies of Shaukat Aziz initiated in 1999 would continue during next couple of years buoyed the CVT-hit investors who flooded the market and made extensive covering purchases at lower levels.
However, a sharp increase in index is not the largest in a single-session. It had risen by 182.47 points on Sept 18, 2003 on recovery after a steep decline of 300 points, and on Dec 1, 2003,when it netted the all-time single-session gain of 194.78 points.
"Positive reaction helped investors digest negative fallout of the CVT which had curtailed the daily volumes in modest proportions", analyst said adding, "but there still were many a slip between the lip and the cup".
Massive short-covering in low-priced cement shares, notably the D.G.Khan Cement - whose management is putting up the country's largest plant for Rs9 billion - followed by the energy and bank shares were leading which brought the market back on rails.
All the blue chips raced towards their pre-reaction levels under the lead of Arif Habib Securities and Javed Omer, followed by Avents, Gul Ahmed Textiles, Haroon Oils, Millat Tractors, Indus Motors, Central Insurance, Unilever Pakistan, Al-Ghazi Tractors, HinoPak Motors, Atlas Honda, Pakistan Oilfiled, the PSO, Shell Pakistan, National Refinery, Gatron Industries, Shahtaj Sugar, Noon Sugar and Pakistan Refinery, the EFU Life.
Losers were led by the Siemens Pakistan, Treet Corporation, Indus Motors, Bhanero Textiles, Wyeth Pakistan, Packages, Thal Industries, Colgate Pakistan, Century Paper and some others but most of the initial losses were recovered after the mid-week.
FORWARD COUNTER: Speculative issues on this counter also followed the lead of their counterparts in the ready section and generally rose under the lead of the OGDC, Bank AlFalah, the PTCL, Hub-Power and the PSO amid active short-covering at lower levels.
Others, notably gas shares also came in for active support on the perception that higher selling rates from July 1, would significantly add to their annual earning. Cement and fertilizers shares followed them on support at lower levels.
