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| August 22, 2005 | Monday | Rajab 16, 1426 |
Karachi stock market stages a weekend rally
THE stocks were back on track last week after shrugging off the protracted bearish outlook. It was the outcome of strong covering purchases in leading oil shares at the current low levels on perceptions that the worst was now over.
Both, the KSE 100-share index and the market capital showed gains of 161 points and Rs57 billion at 7,311.92 points and Rs2,091 billion, respectively. This heralded the return of a bull market under the lead of oil shares and blue chips, including the PTCL on other counters.
Being in a highly oversold position, the market could attract a lot of short-covering by next week as the prevalent low levels ensure massive capital gains after removal of the existing irritants.
A strong weekend rally put the stock market back on rails as investors virtually rushed to cover their positions at attractively low levels ahead of high-level meetings held in the city on Friday on the COT and financing issues.
The KSE 100-share index recovered from the recent lows and breached through two consecutive barriers, reflecting the investor-craze to buy the low-priced shares.
It finally finished at 7,311.92 points as compared to previous 7,150.65 points, up 212.70 points as all leading base shares ended sharply higher amid brisk trading and large volumes.
The chiefs of the Security and Exchange Commission of Pakistan and the bourses met in the city to resolve the protracted standoff on the COT and badla financing issues. Positive signal from the meetings lured the investors back in the market who made extensive covering purchases mostly on low-priced blue chips.
The perception that the replacement of badla financing by the Continuous Financing System (FS) and extension in the tenure of future contracts from the existing 30 days to maximum 60 or 120 days was expected to resolve the investors’ liquidity problems which were said to be major stimulants behind the weekend rally.
The market appeared poised to attain its past glory both in terms of price and volume if its liquidity problems were resolved, analysts said.
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Next couple of sessions will be crucial for market’s future direction and if the feelers were reinforced by the official words on both issues as was widely expected out of the Friday’s meeting, the market could face an avalanche of fresh buy-stops at the current levels.
Unlike the previous sessions, oil shares did not fall in unison as some managed to maintain firm posture followed by reports of further increase in the world crude oil prices at $67 a barrel. But investors lacked general enthusiasm apparently anticipating some positive development on the COT issue.
Reports that the Modaraba companies were allowed to diversify their investment in world markets for capital gains failed to generate fresh buying even on this counter. The managements were allowed to invest $15 million or 30 per cent of funds under their management abroad. Most of the shares on this counter were ruling below their face value.
What ailed the market was now a tricky question, analysts said. The tussle on the COT issue, absence of any official word on the Tarin Committee recommendations to defuse the prevailing tension market and the consequent pressure on money supply continued to be chief irritants.
Although, the KSE board of directors had taken some steps to ease the situation but they failed to lure investors back in the market as none was in a mood to put in his idle funds.
Being in a highly oversold position, the market could stage a robust rally anytime on technical grounds alone, brokers said but it appeared a bit difficult to convince the general investors about the assured capital gains at the current levels on any of the blue chips.
But some independent stock analysts said there was no dearth of money which was floating around low volumes apparently aimed at the restoration of COT facility.
Money will go where it appreciated, they said, if the channels were closed it will remain shy and safe with the owners.
The phase of confrontation appeared to be on its way out after a protracted battle of wits, they said adding, sanity was expected to return to stock trading as no one was inclined to cross the Rubicon in the prevailing situation.
FORWARD COUNTER: The recovery initiated by oil shares was well sustained on the cleared list as the weekend rally put all leading among them on the plus side amid active trading.
The PTCL, the OGDC, the PSO, the Pakistan Oilfields, the Pakistan Petroleum, the National Bank, the MCB, Fauji Fertiliser Bin Qasim and others were leading among the gainers.
—Muhammad Aslam
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