KARACHI, March 12: Shares rallied at the Karachi Stock Exchange on Thursday with the KSE-100 index posting a gain of 149 points (2.68 per cent).

The market behaviour was considered ‘unusual’ by many participants on a day of political mayhem. But several market gurus thought that the trend could be easily explained.

At the start of the session, the market maintained the earlier day’s downward drift for some time, shedding 24 points on the Index, but then it took a turn to the north. Watching the gory scenes of street agitations that pervaded the TV screens, many market participants suspected ‘manipulation’ by the government through the institutions, so as to offer comfort to the investors and the public.

The National Investment Trust (NIT), which holds Rs20 billion in the State Enterprise Fund (SEF), was believed by many to be in the lead of aggressive buyers to support the market.

Tariq Iqbal Khan, chairman and managing director of NIT, who manages the SEF, however, brushed aside such suggestions, saying that the fund had stood on the sidelines. “There was no extraordinary buying,” said the SEF manager and insisted that much of the Rs350 million average daily investment from the fund had been withheld on Thursday.

So what had spurred a bull-run at the market?

The NIT chairman thought that perception was more fearful than reality. The market had already priced in the expected unsavoury events by the decline witnessed in the past few days; stocks were down 104 points on Wednesday.

Arif Habib, stockbroker-turned-investment banker upheld that view, saying that he did not think that market manipulation was at the heart of the rally. “Uncertainty is worse than bad news.”

He explained that forward looking investors had possibly realised that the solution — whatever that might turn out to be — of the prolonged internal political problem was at hand. He said that investors were also buoyed by the unopposed election of chairman of the Senate, which had sent the share prices scurrying up mainly in the last hour.

Dealers noted that volume of 94 million shares was considerably higher than 63 million shares traded on Wednesday. Many blue chip stocks led by commercial banks; oil & gas exploration; oil marketing and fertiliser companies hit their ‘upper circuits’, representing the maximum of 5 per cent increase allowed in a day.

A trader said that a few conglomerates might have seized the opportunity to jack up prices of their group companies in the absence of large-scale selling in the market.

Khurram Schzad, analyst at brokerage InvestCap, said that investors were looking at sunny side, setting the worries over GDP growth; inflation, trade and revenue targets aside.

The cut-off yield on Treasury Bills driven down below 12 per cent at the SBP auction on Wednesday was a strong indication of a possible reduction in discount rates, analysts thought, which should spur investors’ interest in stocks, going forward.

A Merrill Lynch report analysing the current year’s performance of regional markets had placed Pakistan on top, owing to its offer of highest yield (11 per cent) and most attractive price-to-earnings valuation of 4.7 times.

Optimists were passing around the word that it could work as an incentive for foreign funds to reconsider Pakistan equities so as to recoup some of the enormous losses suffered on the Wall Street.
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