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| November 28, 2005 | Monday | Shawwal 25, 1426 |
Index settles above 9,000 points level
THE price flare-up on stock market continued last week as investors were busy building up long positions, even in highly overvalued shares for no apparent reasons.
There was no denying of the fact that the performance of industrial sector though was bullish but in no way it warranted speculative buying in some leading shares - notably the National Bank and the D.G. Khan Cement which had risen beyond predictions, dealers said.
Pledges by foreign donors of about $6 billion in aid may boost some industrial sectors, including cement once the rehabilitation work in quake-hit areas began. However, the current buying euphoria appeared a speculative squeeze on some bank and cement shares.
However, the future outlook appeared was bullish as the index indicated that it could rise further after hitting the 9,100-point level before the weekend reaction.
After eight months of highly volatile and either-way price movements, the KSE 100-share index finally breached through the psychological barrier of 9,000, touching briefly the 9,100 level. Analysts said that it was heading towards its previous all-time level of 10,300, within this year.
The current run up, in no way matched early year’s flare-up which had lifted the index to 10,300 points followed by the market collapse in March. Yet, it sustained because of some leading shares to end the week at 9,064.39, up 130.88 points over the previous week.
The index finally closed at 9,064.39 points as compared to the previous 8,933.51 level - a fresh rise of 130.88 points, reflecting the strength of the leading base shares.
It kept fluctuating between 7,000 and 8,000 levels during the last couple of months and the breakthrough was backed by a possible boost in the economy and the industry on account of the rehabilitation pledges in the NWPF and Azad Kashmir.
The total market capital also swelled by Rs50 billion to Rs2,591 billion as the heavily-capitalized shares, notably the OGDC, the Pakistan Petroleum, the PTCL, the PSO and some others recovered from last March lows.
Opinions about its sustained rise well above the 9,000-point chart level were divided. But leading analysts predicted that it could maintain its upward thrust in coming sessions also on the strength of a robust economy, higher corporate dividend, bonus shares and massive aid pledges.
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A big flare-up in the National Bank, which appeared to be heading toward its next target of Rs200 per share, signalled the extent of speculative buying and an apparent squeeze. Identical buystops were witnessed in other bank shares, notably the MCB, the Faysal Bank and the Bank of Punjab.
Stocks responded bullishly to foreign aid pledges of $6 billion on the perception that the economy, and in turn bourses, would get the needed boost once the reconstruction resumed in the quake-devastated areas.
The market’s early buoyant outlook was also reinforced by the KSE 100-share index, which briefly touched the psychological barrier of 9,000 at 9,001.22 points but failed to sustain it on late profit-selling.
However, it was satisfying to note that the broader market performed well sans the important ones, including the leading base shares which demonstrated that the future outlook of market was bullish.
All eyes were focused on the index level beyond the 9,000 points if it resumed the upward drive to its next chart point of 10,000 points during the current year. There could be a sustained bull-run and if it faltered then there will be a spate of bear-selling, brokers predicted.
The early buying euphoria on aid pledges and its impact on the economy seemed to have lost the importance of a market stimulant owing to some second thoughts over them, said a leading analyst. He further said that the term of soft loan for the bulk $4 billion appeared to have triggered the late selling.
The lingering issue of the PTCL also overshadowed a positive impact of the donor’s conference on the bourses, some others said adding but those who could peep through the future were terribly bullish about a positive outcome.
Whether or not the fresh talks on the PTCL issue in Dubai will be final and complete, but the transaction could well prove a double-edged weapon for the market as a failure may bear a negative fall-out on the market, they added.
It will also affect the sell-off of the PSO next month for which half a dozen prospective bidders were already short-listed, they said.
The selling at inflated levels was also attributed to possible implications for a buoyant cement industry if reconstruction was done by using the fibre glass and wood, they said.
It was, however, widely speculated that the economy would receive the needed boost if all aid pledges were honoured in time.
FORWARD COUNTER: Speculative issues on the forward counter maintained their upward drive and finished further higher under the lead of the National Bank, the MCB, the PTCL, the D.G. Khan Cement and some cement shares, including the Maple Leaf. Leading shares on other counter also rose, major gainers among them being the Fauji Fertiliser, the PSO, the Engro Chemical, the Pakistan Petroleum and the OGDC.—Mohammad Aslam
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