New records, both in terms of index level and market capitalization were established on the Karachi Stock Exchange last week as higher badla rates and the market’s highly overbought position failed to halt the bull-run or an unprecedented price flare-up.
The market entered the danger zone long back, but the massive floating money in the absence of other gainful investments was not in a mood to miss the attractive bait of capital gains in the backdrop of higher dividend announcements
Stocks therefore, maintained their upward drive aided by higher corporate announcements and speculative buying on those counters whose board meetings were due during the next couple of days, signalling that the current run-up was not overdone.
Both, the KSE 100-share index and the market capitalization were pretty comfortable at their new all-time peak levels of 4,604.28 points and Rs1,020 billion, the best levels may still come. While the former showed an increase of 141.23 points or six per cent, the latter rose by Rs31 billion.
However, the index after two abortive bids failed to stay above the 4,600-point index level, as every time the bears indulged in massive selling in the leading shares, sometimes in the PTCL and at others in the Hub-Power, which together held a weightage of 43 per cent.
Despite the market’s sustained run-up for the last two months, the inability of the index to stay above the 4,600 points worried those analysts who were predicting that its next chart point could be 5,000-point level. The weekend session at last witnessed the crossing of the Rubicon.
“The tussle over the LFO could well prove a major depressant in the sessions to come but I don’t feel that the market, as yet, had already touched its saturation point”, a leading analyst said. Its direction may remain upward on the strength of lower interest rates, charm of the higher capital gains, a fair return on investment, and the easy money supply.
Higher carryover rates and a highly overbought position did worry investors but it was not that easy for the bears to push their way in the presence of so many stimulants, he added.
The chief inspiring factor behind the run-up was the presence of strong institutional support at lower levels in most of the pivotals coupled with a good bit of bargain-hunting ahead of the board meetings of some leading companies. Dividend announcements from the Berger Paints, Pakistan Papersack and Thal Jute at 40, 50 and 100 per cent plus 25 per cent interim already paid in that order were also on the higher side of the market expectations and proved an aiding factor. The National Refinery and the Indus Motors at 75 and 50 per cent final also evoked strong buying on their respective counters.
The market was yearning for political peace at home as reports of each “understanding between the two” gave tremendous boost to the investor-morale who opted for fresh buying”, analysts said.
Reports that the final date for the disinvestment of controlling shares of the oil giant, the PSO will be fixed in late October after consultation with the Kuwaiti bidder — one of the three short-listed — also aided the recovery.
“The LFO deal between the MMA and the government — whether or not signed — the news certainly boosts the investor-morale as was reflected by today’s rebound”, analysts said adding, “the opinions were however, divided on the issue as any deal on the MMA terms appear uncertain as it may involve many things at a stake”.
For the last several months the market was receiving the news about a possible deal between the two and reacted bullishly. But the reported step forward on the LFO and a step back, worked they said.
However, the bulls needs some bullish news to drive bears out of the market and the LFO provides a convenient escape route for both i.e., the part of the speculative game in stock trading.
Floor brokers said the market had some positive corporate reasons to remain in an upbeat mood at least for next couple of weeks as some of the encouraging dividend news were around.
But some others said, fears of a big shakeout were still there but if there was a relative peace on the political front, it could sustain the current run-up in the months to come.
“In the absence of many gainful investment avenues, stocks were the best and the floating funds could come and go out of them, without leaving negative impact on their inherent strength”, they said.
Energy and insurance sectors led the market advance as the institutional traders covered their positions followed by some leading second-liners in the cement and other sectors.
Auto shares, however, remained under pressure partly on post-dividend selling and partly on government demand to lower the car prices in line with neighbouring countries. The Indus Motors, the Pak-Suzuk Motors, the Honda Atlas Cars received massive battering almost daily on active selling.
Traded volume was maintained on the higher side, above two billion shares, bulk of which went to the credit of the Hub-Power, the PTCL, the PSO, Pakistan Oilfields, the PIAC, Fauji Cement, Sui Northern Gas, Lucky and the D.G.Khan Cement, the FFC-Jordan Fertiliser, the KESC and several others including some second-liners.
Big gainers were led by the Unilever Pakistan, Pakistan Oilfields, Pakistan Refinery, the ICP SEMF, National Refinery, Island Textiles, Treet Corporation, Colgate Pakistan and many others.
But the largest rise was recorded in Javed Omer, which was heading to hit the 1,000-rupee-mark owing to higher dividend followed by the Wyeth Pakistan, the National Refinery, Pakistan Refinery, the ICI Pakistan and Siemens Pakistan.
Other prominent gainers included Jahangir Siddiqui & Co, Lakson Tobacco, International Industries, Pakistan Paper Products, the PSO, Shafiq Textiles and the IGI Insurance.
Losers were led by the Merit Packages after the 35 per cent dividend, Millat Tractors, Atlas Honda, Aventis Pharma, the Packages, Central Insurance Abbott Lab, Nestle Milkpak, and some others.
FORWARD COUNTER: A sharp gain of Rs7 in the ICI Pakistan on strong speculative support highlighted the trading on this counter where the PSO soared by Rs12 amid heavy trading.
The PTCL, the Hub-Power, Engro Chemical and some others also rose amid large volume, and so did the Sui Northern Gas, the Pak PTA and Nishat Mills.—Muhammad Aslam