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| July 17, 2006 | Monday | Jumadi-ul-Sani 20, 1427 |
KSE bounces back with extended gains
THE stocks opened on a weak note due to the negative fallout of fresh probe reports of March 2005 crash. However, it bounced back on active mid-week short-covering aided by strong financial buying by finishing with an extended gain.
A notable feature of the last week’s trading was that the KSE 100-share index settled above the crucial level of 10,000 points. It sustained the same thus signalling a continued forward drive in the week to come.
It appeared a judicious blend of both, institutional and speculative buying ahead of the board meetings of cement, oil and bank sectors and the market talk of higher payouts and bonus shares. These triggered buy-stops on the low-priced cement shares under the lead of Fauji Cement.
The KSE 100-share index broke through the psychological barrier of 10,000 points and sustained it on late weekend buying. The impressive daily volumes reflected a major change in the investor-buying strategy for new fiscal account.
After having touched the week’s highest level of 10,126.60 points, the KSE 100-share index finally finished around 10,027.09 as compared to previous closing of 9,836.04 points. This showed an increase of 191.05 points which added Rs50 billion to the market capital at Rs2,816 billion.
Most analysts predicted that the index may not attain its all-time peak level of 12,336 points. The new account buying euphoria reflected that it could sustain itself beyond the coveted level of 10,000 points fuelled by higher corporate dividend including interim payouts.
Leading bank shares, notably the MCB and the National Bank came in for active selling towards the fag-end of the week and finished with clipped gains but leading shares notably the Lucky Cement and the D.G. Khan Cement remained best buys at current levels followed by the reports of higher export and local sales.
The opening however, was a bit hesitant in the backdrop of controversy about the market’s crash in March 2005. Reports that the US forensic investigators were also probing the issue did not deter investors to be overwhelmed by the possible fallout of the probe as was reflected by the mid-week buying flurry.
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Apart from new fiscal portfolio buying by institutional traders and funds, the other stimulating major factor was the reports of higher earnings by the leading bank, cement and oil shares for the year ended June 30, 2006 and the market talk of higher payouts.
Investors seemed to have ignored bad news from the political front and the SECP row at the highest level about the last year’s crash. They operated according to future market perceptions and took the risks wherever due.
The earlier panic was so massive that investors were not buoyed by a record cash dividend of Rs5.80 per unit by the National Investment Trust (NIT) announced last Saturday.
All the market leaders came in for panic-selling and fell like nine pins, facing lower locks in the absence of buyers. The National Bank, the OGDC, the MCB, the Pakistan Petroleum, and the Pakistan Oilfields were leading among them falling sharply lower. But most of the fall was recouped in subsequent sessions.
Presentations made by the former chief of the SECP and others in the National Assembly’s official probe committee on this and other issues seemed to have opened a Pandora box, having a negative fallout on the stock market.
Although, the committee’s findings would be finalized within next two or three weeks, conflicting views on the issue could keep investors at their toes in the intervening period, share business being the chief victim.
If the blame was transferred to 11 leading brokers who allegedly manipulated the market crash after indulging in blank sales and wash trade, it may follow fresh massive unloading by the big ones, a leading stock analyst Hasnain Asghar Ali feared.
Faisal Abbas, another stock analyst said that jolted by the proceedings of the probe committee and counter allegations by the high-ups, the market did not toe the line and was back on the rails just a day after the early plunge as investors covered the positions at lower levels.
FORWARD COUNTER: Barring the National Bank which showed a fractional fall all other leading shares, both in oil and cement sectors finished fully recovered from the early lows. The Pakistan Petroleum, the Pakistan Oilfields and the D.G. Khan Cement were leading among them on active short-covering.—Muhammad Aslam
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