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| December 5, 2005 | Monday | Ziqa’ad 2, 1426 |
Stocks recover after initial commotion
AFTER displaying erratic performance early in the week — which analysts termed as the negative fallout of the Securities and Exchange Commission of Pakistan’s (SECP) directive — stocks were back on the rails due to heavy weekend short-covering in some important scrips. The index and the market capital both, maintained an upward drive.
No one could deny the fact that the market was in an overbought position and needed corrections at highly inflated levels on blue chip counters. Investors went for almost a big kill, that too at the end session.
The motive behind this run-up appeared to show that the SECP directive did not have a relevance to the market’s outlook based on surging economy and high corporate earnings.
The stocks last week recovered smartly from the mid-week lows on massive index-related buying in leading base shares and managed to finish with fresh gains on a wide front aided by strong speculative buying in the sought after stakes.
The massive weekend rally reflected that the leading brokers and the KSE members had decided to defy the SECP directive of banning to elect the three chairmen from among their members.
The KSE 100-share index rose by 162.02 points at 9,226.41 as compared to 9,064.39 a week earlier; Rs54 billion to the market capital at Rs2,644.billion.
Analysts feared a showdown between the contenders of power and a big shakeout after bourses decision, not to implement the SECP directive.
The market passed through a technical correction at inflated level as investors played on both sides of the fence indulging in alternate bouts of buying and selling.
But the close was well above the previous peaks owing to late buying triggered by the reports of firm stand taken by the bourses against the SECP move to regulate the existing management setup through official sources.
The mid-week press reports of the SECP directives and its subsequent withdrawal triggered a lot of covering purchases at the Wednesday’s lower levels.
However, the market sources said that the directive was not withdrawn but deferred to meet the legalities before an official notification was issued. It reflected the inclination of the SECP’s high-ups to further reform the stock trading.
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At this stage, it could not be precisely predicted as to what future direction the market will take on the position taken by the contenders and its impact on the trading.
There was a loud whispering that there could be a tussle on the issue in coming weeks and investors would be the main losers in the bull-fight.
Share values fell on the directive reports but recovered on the news of its withdrawal. Yet, uncertainty prevailed due to the lack of any official words, brokers said.
Reports from the PTCL front indicate that the deal would go through and an official announcement about the details was expected by next week, both from Dubai and Islamabad.
The opening was on the higher side on positive news from the privatization of controlling shares of the oil giant Pakistan State Oil (PSO) possibly by the end of next month. This triggered heavy buying in it which was followed by a sustained price flare-up and a fresh robust rally.
Although, the forward march of index beyond the 9,000-point level was modest but it progressed indicating that the big ones were treading safely on the tricky path without taking undue risk reminiscent of the last March’s collapse, brokers said.
According to reports originating from the official sources, names of some prospective buyers were short-listed after the pre-bid meetings. The date of the final bids for the PSO sell-off will be announced, shortly.
The market sources said that the short-listed companies were a judicious combination of both local and foreign companies of good repute and sound financial footings.
The PSO, the OGDC, the National Bank and the PTCL led the market run-up. The latter on reports that the sell-off was expected to be completed soon, as talks on the issue were being held between the buyer and the seller, official sources said.
If the PSO sell-off was carried out as stipulated by the Privatization Commission, then this may overshadow the dust raised on the PTCL issue, one analyst said adding that the last month of the year will be crucial in setting the market’s future trend.
All eyes were now focused on the sell-off of the PSO as any major breakthrough on this front could push the index to its previous best level and possibly above - perhaps by the year end, some others said.
Some low-priced shares followed by cement remained in active demand and ended further up. Other favourites did not show much change and were mostly traded higher.
The United Sugar, which recently changed hands and was purchased by another crusher, and the Siemens Pakistan were leading among the gainers followed by the Attock Petroleum, the Lakson Tobacco, the MCB, the National Refinery, the Clover Pakistan, and Dawood Hercules.
Losers were led by the Wyeth Pakistan, the Shezan International, Colgate Pakistan, the AKD Securities, the Artistic Denim, the Thal, the Rafhan Best Foods, the EFU Life Insurance, the Ferozsons Lab, the IGI Insurance and some others.
FORWARD COUNTER: Main shares also followed the lead of their counterparts in the ready section and rose sharply under the lead of the MCB, the OGDC, Fauji Fertiliser Bin Qasim, the PSO, the Engro Chemical, the D.G. Khan Cement and some others. But the PTCL fell and finished well above the week’s low on late covering purchases.
—-Muhammad Aslam
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