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| March 27, 2006 | Monday | Safar 26, 1427 |
Market remains bullish on heavy buying in oil shares
A fresh spate of heavy foreign buying in leading oil shares kept the market and investors in a highly bullish frame of mind last week. Institutional traders, however, followed the lead of trendsetters. A sharp six per cent increase or 508 points at around 11,458.59 in the 100-share index reflected that it was heading towards the previous record. However, analysts predicted that if the current run-up was sustained then the 12,000-point level may not be an elusive goal.
None could dispute the fact that most of the leading shares have the potential to rise from their pre-reaction level of early March based on the presence of foreign support, they added.
The technical rebound manifested itself in a bigger way during the week allaying the fears of investors of fresh pruning at still higher levels on the blue chip counters.
It was a judicious blend of both local and foreign buying on oil counter where some leading shares had dropped to an attractively lower level during the recent sell-off, analysts said adding that the higher cash dividend and bonus shares by the National Bank and some leading insurance shares, notably the EFU General and Life was an aiding bullish factor.
The market’s buoyant outlook was also well-reflected in the KSE 100-share index which recovered by 508.50 points adding Rs131.00 billion to the market capital as leading base shares, notably the OGDC, the PTCL, the Pakistan Petroleum, the Pakistan Oilfields and the National Bank showed broad rallies.
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I think the bulls were inclined to push it up to its next, so far elusive, target of 12,000 points before the introduction of a newly recomposed index expected to be introduced from April 3”, predicted a leading stock analyst.
Although, the selected shares on other counters, notably bank and insurance remained in active demand and generally tended further higher. The broader market did not toe the line of oil, bank and cement shares owing to the lack of aggressive buying.
Apart from the strong presence of foreign fund buying on the selected counter, a major boost to price flare-up was attributed to higher cash dividend of 25 per cent plus bonus shares of 20 per cent by the National Bank of Pakistan.
Its share value rose on fresh buying aided by higher after-tax profit of Rs12.7 billion and the EPS Rs21.51 per share. Despite the post-dividend modest pruning it resumed its upward drive and was heading towards a new chart point of Rs300.
The annual profit of National Bank was in line with the analysts’ predictions but opinions were now divided over the future outlook of the share value.
Some said that it could match the pre-reaction level at above Rs325 per share but others pointed out that the profit-selling may set in at inflated level.
It could well be the last dividend from a leading bank for last year, some analysts said. Whether or not the current run-up could be sustained owing to the presence of foreign buying and local speculative activity was not clear at this stage, they added.
During the last financial year ended on December 31, 2005 about two commercial banks showed massive increase of 99 per cent in their profits, outpacing the energy and power sectors. Steep increase in their share value was well-reflected owing to higher earnings.
News from the oil sector was positive as new oil and gas discoveries will continue to provide support to prospective buying at the current lower levels. Some of the blue chips have reached that level while others said few among them were already at peak.
Most leading investors were ignoring the political implications of law and order situation in some areas but those who think of long-term investment in share business were a bit reluctant.
Despite a lot of late profit-selling on some counters, the main shares managed to finish higher under the lead of Attock Petroleum, Rafhan Maize, and several others which showed smart gains while prominent losers were led by the Lakson Tobacco, the Treet Corporation, the Dawood Hercules, the National Refinery and some others.
But the OGDC was leading among the most actives both in terms of gains and volume as some leading foreign funds were grabbing its floating stocks at current levels.
FORWARD COUNTER: Barring the National Bank and some more which reacted at the close, all other blue chips managed to recover most of their losses. Major gainers among them were the OGDC, the Pakistan Oilfields, the D.G. Khan Cement, the Lucky Cement, the Pakistan Petroleum and some others amid active trading.—Muhammad Aslam
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