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Karachi stocks last week ran into a long overdue technical correction and finished with clipped gains after having risen sharply higher during the previous five straight weeks.
Bulk of the selling remained confined to the overvalued shares in the oil, bank, cement shares and some other leading pivotals but in most of the cases extreme gains were pared off. Most of them still held on to the massive gains netted during the sustained run-up.
Indications were that the market could resume its upward thrust by the next week as board meetings of some of the leading companies, notably OGDC, were due next week and they could trigger active short-covering leading strong technical rebound.
The mid-week reports of opposition’s no-trust move against Prime Minister Shaukat Aziz on Aug 23, however, seemed to have taken heat out of a bullish market as weak-holders and some genuine investors unloaded their long positions in a virtual panic but there was no matching buying as was reflected by falling volumes.
The opposition may not have the numerical strength to carry through its no-confidence motion against the prime minister, but it has certainly added to the prevailing political uncertainty and halted the market’s dividend-driven strong rally. “The future share business outlook now is not that clear,” says a leading stock analyst Faisal Abbas adding “investors may think twice before coming in a big way until Aug 23”.
But Zia Javaid, a stock analyst, predicts the market is expected to be back on the rails as higher dividends from some of the leading companies, notably oil giants, are around by the next week.
After having risen to 10,846 points at one stage, the KSE 100-share index finally finished around 10,406.40, off 386.18 points as compared to 10,772.58 points a week earlier. The reaction came after straight six-week sustained run-up, which added 500 points to the index last week and pushed the market capital above the crucial level of Rs.3,000.00 billion at Rs3,027.00 billion. But during the week under review the market capital fell by Rs100 billion at Rs2,0910 billion from Rsd3,010 billion on late selling in the leading base shares.
A higher cash dividend of 220 per cent plus bonus shares of 20 per cent by Shell Pakistan boosted trading on the oil sector and analysts predict other oil companies may follow the suit just at the heels of PSO.
Together with the interim of 80 per cent already paid, the total Shell payout for the last year ended June 30 amounted to 300 per cent cash and 20 per cent bonus. EPS stood at Rs70.90 for a 10-rupee share.
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The share value of Shell rose initially adding to the last Friday’s rise of Rs29.65 but late selling pushed its share value lower from the post-dividend peak level but signalled that it could rise further on the strength of higher payout. However, owing to shortage of its floating stock and higher price, volume figure did not match the rise in its value.
Just at the heals of PSO, whose management last week announced a cash dividend of 340 per cent, Shell Pakistan’s final payout has reinforced the investor perceptions that the oil sector could spring pleasant surprises in the weeks to come.
OGDC board is meeting on Aug 15 and on the strength of float its GDR and earnings followed by others leading oil shares could keep investors in an optimistic mood in the coming weeks.
Analysts said technical corrections here and there notwithstanding, the future outlook appears to be bullish at least until the current buying euphoria is sustained by the corporate announcements.
But some others said developing situation on the political front and the end of dividend announcements could pull the market back to around the index level of 10,000 points.
PTCL continued to derive strength from the reports that its share would be listed on the Dubai bourse and during the last couple of sessions rose by Rs8 on large volumes. It is inching up to its pre-reaction level of Rs60 plus.
FORWARD COUNTER: Speculative issues on the forward counter came in for active profit-selling under the lead of oil and bank shares and finished sharply reacted from the previous highs.
National Bank, OGDC, Pakistan Petroleum, MCB, D.G.Khan Cement, Shell Pakistan were leading among the losers on active profit-selling at the higher inflated levels.—Muhammad Aslam
