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| February 19, 2007 | Monday | Safar 1, 1428 |
Stocks shed gains amid bullish outlook on corporate news
STOCKS last week shed some of the extreme gains netted during the sustained run-up at inflated levels as a section of leading investors including financial institutions unloaded their long positions in an overbought market.
Essentially, it was technical selling long overdue and has nothing to do with any negative background news and that is perhaps why larger fall was averted.
Performance of the broader market remained volatile throughout the week as leading investors played on both sides of the fence by way of their portfolio adjustments.
The KSE 100 share index was quoted lower by 465.25 points at 11,389.40 compared to 11,844.65 the previous week, eroding Rs120 billion from market capital at Rs3,107bn. The KSE 30-share index suffered a decline of 680 points at 14,344.15 from the earlier weekly close of 15,024.
There is nothing basically wrong with the future share business outlook, which continues to be bullish as far as corporate news is concerned. However the correction was long overdue. The performance of base shares was not that bad despite the fact that some of them received massive battering under the lead of oil and cement shares. However, only extreme gains were pared off in most cases.
However, terribly credible performance of the banking sector ahead of the board meetings did not allow the market to run into a deeper recession owing to strong buying at the dips. The KSE 100-share index showed either-way movement within the stipulated correction of 500 points but finally managed to finish well above the weekly low around 11,400 points as compared to 11,844.65 last weekend.
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“I don't think bears could outwit bulls half way of the corporate announcements”, said a leading stock analyst Faisal Abbas “some of the best results are still to come”.
An interim dividend of 80 per cent by the Shell Pakistan and 12.5 per cent by the Hub Power Company may be on the lower side of the market perceptions, but their final could be much higher.
But on the other hand a cash dividend of 30 per cent plus bonus shares of 25 percent, with EPS at Rs14.12, by the United Bank gave a pleasant surprise to its stakeholders and so did the Askari Bank, which came out with 50 per cent bonus and 10 per cent cash dividend. But its EPS at Rs11.23 was claimed to be below analysts expectations.
Both the news gave a clear message to those who could peep through the future and the developing situation in the banking sector owing to its higher earnings and a massive inflow of foreign funds in it, analysts said.
“The market thriving on a massive borrowed money could falter any time to meet its technical demand,” a leading analyst Ashraf Zakrai said. “With CFS investment staying above Rs50 billion plus, the retreat with allied financial risks is always there. In similar situation as the prevailing one, the jitters among weak-holders and short-term investors further accentuates the situation in various forms, he said.
However, the fresh correction was against the predictions of some leading analysts who predicted continued bull-run above the 12,000 level, another analyst Faisal A. Rajabali said.
“No one should worry by the snap fall,” he said adding “all the basic fundamentals points to a robust market on the strength of upcoming higher dividend still in the pipeline.
FORWARD COUNTER: Leading shares on the cleared list also followed the lead of their counterparts in the ready section on active selling and finally ended lower after mid-week recovery.
MCB, National Bank, OGDC, Pakistan Petroleum, Pakistan Oilfields, D. G. Khan Cement and some others were leading among the losers on active selling.—Muhammad Aslam
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