Karachi Stock Exchange – File photo by AFP
Karachi Stock Exchange – File photo by AFP

KARACHI: An addition of 29.15 points to the KSE-100 index lifted it to hit the 15,000.08 points level at the Karachi Stock market on Thursday.

It was a feat accomplished after about four-and-a half years (52 months) and stood short by only 737 points of the highest-ever level attained by country’s main bourse on April 20, 2008. Thursday marked the last day of trading before the end of Ramazan and Eid holidays. No wonder investors, brokers and traders went home to enjoy the six-day break (Friday to Tuesday next) for celebrations, grinning from ear to ear.

But what exactly is there to celebrate?

“Since the KSE-100 index is cum-dividend, even if the index had remained flat, the addition of dividends paid by companies over all those 52 months would have taken the index to this level,” says Nasim Beg, Executive Vice President, Arif Habib Investments.

He, however, affirms that the market has seen some positive developments over the years.

"Even if the index is hitting the roof in good measure due to the addition of dividends, that also means companies are earning healthy profits and making payouts to shareholders. It is a thing to cheer about", he says.

In 2008, when the index had hit all-time high, the Pakistani stocks were trading at price-to-earnings multiple of over 10 times.

There was the lingering fear of a ‘bubble’ that eventually did burst.

However, currently, the index looks to be genuinely strong for there is very little speculation and low leverage. The KSE stocks are still cheap at the current 7 times earnings multiple, compared to twice the multiples of most regional markets.

Mohammad Sohail, Chief Executive Officer at Topline Securities said that the catalyst for the current run up in share prices was the higher than expected cut in interest rate by the SBP in its Monetary Policy Statement unveiled last week.

He said that it restored investor confidence. Sohail said that his brokerage house has held on to the view that in case of a political upheaval, resulting in a care-taker set up, the market would better the all-time high index level of 2008 during the pre-election rally that would follow.

A market participant subscribed to the view that there was still room for values to rise.

“It has to be recalled that from the index level of 9,000 points onwards, small and mid-tier stocks attracted investors’ attention, which saw even some of the ‘lame ducks’, jump to unfathomable heights,” he said.

Even on trading on the last day, Thursday, five of the 10 volume leaders were priced in single digits. Those included the cement stock Lafarge Pakistan which posted the highest turnover of 23 million shares and closed at the price of Rs5.27.

Other high volume small and mid-tier stocks on Thursday included: Fauji Cement closing at price of Rs6.50, KESC at Rs5.73; Maple Leaf at Rs7.66 and Dewan Cement at Rs4.25.

A dealer reminded that stocks with heavy weightage in the index, mainly those on the Oil and gas sector, such as OGDC had pushed index to the highest ever level in 2008 and the same stocks when dumped, triggered panic selling at the KSE.

“Such is not the case this time around,” this equity dealer argued.

He insisted that quite many of the ‘heavyweights’ on the oil and gas, fertiliser, insurance and few other sectors were yet to be fully priced.


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