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| February 04, 2008 | Monday | Muharram 25, 1429 |
Stocks improve on higher dividend reports
AFTER highly volatile performance under the cross-current of positive and negative news, stocks last week extended its recovery drive on renewed selective support on the blue chips counters.
The fresh improvement was aided partly by higher dividend reports and partly due to an oversold market, but price trend remained volatile.
The 50 basis point increase in the State Bank’s discount rate from 10 per cent to 10.5 per cent to halt the rising rate of inflation at the fag-end of the week, did not have a negative impact on the share business despite the fact the cost of borrowing would be much higher in future.
Some analysts said it would take its toll possibly by next week when investors would have fully calculated the additional cost on their daily transactions in the share business.
After having fluctuated both ways amid alternate bouts of buying and selling, the KSE 100-share index managed to finish with a gain of 118.05 points at 13,974.41 as compared to 13,856.36 a week earlier as some of the leading base shares tended further higher. It crossed the barrier of 14,000 twice but failed to sustain it on late weekend selling.
The leading analysts are debating the future course of the market, notably whether it could stabilise above the 14,000 points or not. They say that with the market capital hovering between $72 billion and $68 billion for the last couple of weeks indicates that the market has the will and capacity to rise.
Unlike previous weeks, the rally was well-sustained during the last week aided partly by higher payouts and partly to positive news from some other leading companies.
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“The dividend season has just begun”, said a leading analyst Faisal A. Rajabali adding “some other pleasant surprises are also on the cards in the coming weeks”.
However, falling daily volumes indicate that both the general investors and financial institutions are not inclined to go beyond specific limits at least for the near-term. Elections uncertainties were restricting a section of investors not to make long-term investments.
Armed clashes in the tribal areas are the main factor behind the absence of foreign investments, they said. But a leading analyst Ahsan Mehanti thinks otherwise. He is of the view that the dividend season has just started and the rate of payouts suggests tat it would play a stabilising impact on the volatile market.
“There is a loud whisper in the corridors of the bourse that payouts of oil, and cement sectors are expected to be well above analysts’ predictions and could give a pleasant surprise to both the investors and the brokers,” he added.
However, he ruled out the return of the prodigal son before elections as leading among them believe in quick profits and not in losses in an uncertain market.
Stock analyst Ashraf Zakaria said the market might have been facing many irritants but the fact was that it was guarding the resistant level of 13,500 which reflected that there was nothing wrong with its basic fundamentals and it could bounce back to its pre-reaction level any time.
Forward counter: Leading shares on this counter came in for active support and rose under the lead of MCB, Engro Chemical and PSO despite mid-week selling.
The OGDC, National Bank, Fauji Fertiliser, Lucky Cement and some others also ended modestly higher on support at lower levels.—Muhammad Aslam
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