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| January 30, 2006 | Monday | Zilhaj 29, 1426 |
KSE 100-share index maintains upward drive
KSE 100-share index last week maintained its upward drive beyond the 10,000 point level reinforcing its next target of 12,000 without any significant technical correction. It has already successfully breached through four consecutive barriers and firmly settled well above 10,447.00.
Apart from strong local demand, persistent price flare-up in most of the leading MNCs also reflects the presence of strong support in leading scrips such as Colgate Pakistan, Gillette Pakistan, Sanofi Aventis and some others. Shortage of floating stocks and higher earnings was another contributory positive factor.
It was a record week, therefore as a number of new records were set up and some other surpassed by a big margin as buying euphoria even at the highly inflated levels remained unsatisfied till the end of the last week. The KSE 100-share index posted fresh gain of 219.69 points at 10,447.56, adding Rs60 billion to the market capital at Rs3,010 billion.
The market is aptly operating under an old adage “as goes January so goes the market in the new year trading.’ That is perhaps why highly inflated levels on some of the blue chip counters did not deter investors to have them both on the attractive bait of capital gains and market talk of higher payouts.
Both the KSE 100-share index and price flare-ups on the blue chip counters, reflects that investors have ignored the last March market crash aided by positive basic factors and ensured capital gains almost on the all the counters and higher dividend on bonus shares by the blue chips.
There is a loud whispering in the KSE corridors as to where the end will be. Whether or not, the market crash is imminent. But the consensus appears to be on the index level of 12,000 points but what next is not clear.
There is, however, a basic change in the supporting factors as compared to the previous as smooth rolling of positions on the forward counter from the January contracts to the ruling February settlements have allayed investors fears about a possible default by any of the investors.
“Technical correction after each a rise notwithstanding, the retreat of the market from the current levels appears to be a remote possibility in the changed working conditions”, some analysts predict.
The fact the market has absorbed the negative fallout of dam issue and Balochistan situation signals that investors are not influenced by the external factor and are actively responding to market fundamentals.
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The KSE 100-share index established an all-time high record at 10,447.56 followed by fresh heavy buying in the leading base shares under the lead of bank and cement sectors aided by perception of higher corporate earnings and a robust economic growth.
It surpassed its previous record level of 10,303.00 points hit on March 15,last year but followed by a massive market crash amid persistent selling speculative selling, which pushed it down as low as 7,000.00 points or 25 per cent during the post-record trading. But it sustained the level beyond 10,000 during the week.
A section of investors is still in two minds about the market’s current meteoric rise as memories of last year’s March crash which wiped out Rs500 billion including Rs12 billion of the small investors from the market capital are afresh in their minds. But this appears to be a different story based on some positive fundamentals.
But the current flare-up was progressive and is supported by more than one positive background news and is expected to be sustained well above this level around 12,000 points in the coming weeks.
“Expectations of higher dividend and bonus shares, an attractive bait of an ambitious privatization programme of state owned units and higher economic growth rates would not allow investors to stay on the sideline lines”, analysts said.
The important thing is that there is virtually beeline of buyers rather than sellers at the inhibiting higher levels and that could not be termed as speculative bull onslaught, some others said.
“National Bank at Rs240 and MCB at Rs197.50 against their face value of Rs10, for instance, signals that the investor scramble for them at the inflated levels is not without some sound reasons billed under the prudent investment strategy”, most leading brokers believe.
Bulk of the support remained confined to bank, cement and some oil shares irrespective of the inhibiting ruling inflated prices, while some IT shares also came in for active support and for good reasons too.
FORWARD COUNTER: Smooth rolling of forward positions from the matured January contracts to the ruling February settlements was welcome by investors as was reflected by a fresh price flare-up in most of the leading shares under the lead of National Bank, Pakistan Petroleum, and OGDC.
MCB,Telecard, Fauji Fertiliser Bin Qasim, PTCL, Lucky Cement and Bank of Punjab also showed firm trend and so did PSO, Engro Chemical and Telecard.—Muhammad Aslam
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