The bomb blast close to the US Consulate intercepted pre-budget rally on the stock market last week as investors hastened to cash in on the available margins fearing further decline.

The KSE 100-share index managed to hold on to most of its earlier gains, up 76.79 points or over five per cent at 1,786.00 as compared to 1,691.24 a week earlier, while the market capitalization rose by Rs16.056 billion at Rs410.213 billion. At one stage, it touched the recent peak level of Rs415 billion.

Although the market was a bit disappointed on the outcome of Rumsfeld’s talks with the President or the foreign minister as the peace expectations linked to his visit did not produce the desired impact on the stock trading.

“I have not come with any peace plan”, he clarified but commenting on the prevailing Indo-Pak standoff he said, “there is no change in the ground situation. Tension is easing owing to some steps taken by India after decline in the alleged cross- border incursions”. How investors reacted to his statement here and in India will be known when the market reopens after the national budget next Monday.

Whether or not the investor-friendly new budget as claimed by some analysts will enable the market to pull itself out from the negative impact of military standoff will also be known by the next week. However, stocks are poised for a major break-through after ascertaining whether or not the current US peace moves are genuine.

The bomb blast close to the US Consulate at the weekend session killing 12 persons triggered panic selling but the proximity of the national budget and rumours of incentives did not allow major fall in the shares.

Already the KSE 100-share index has recovered six per cent followed by positive feelers allaying fears of war and is sustaining it on the perception that the goal of peace may not be elusive.

The central bank’s quarterly report about the state of economy was not that encouraging as the rate of growth in GDP is below the target and the performance of the industrial sector far from satisfactory. But its review did not affect the trading in stocks as investors were eying the new budget to be unveiled on June 15 .

But sanity on the borders may not immediately return and the resolve not to go to war before exhausting all peaceful means through bilateral talks, could avert awkward situations or the last option.

“The spontaneous bullish market reaction to positive moves reflects how it is yearning for peace”, said a leading KSE member commenting on the buying euphoria which followed the good news from across the border and the market’s spectacular rise to its pre-reaction level. The six per cent rise in the index means an increase of over Rs20bn in the market capitalization at Rs415bn. It ended around 1,768.00 points as compared to 1,691.00 last week.

The index has also showed steep rise of 135 points last month on identical news from India allaying fears of war after peace moves launched by some of the leading world power brokers.

However, some of the leading analysts are still in two minds and are not inclined to “go for a big kill” until India specifies steps to ease the war-like hysteria and thus they mostly played the safe.

“The US may be an honest peace broker in the subcontinent”, says a leading stock broker adding, “ but it is unwise to ride the bandwagon enthused just by the press reports”.

There is a reason to believe that the buying in part was also aided by feelers that the new budget due on June 15, will be investor-friendly though being unveiled in difficult conditions and lacklustre performance of the economy owing to the Afghan war.

Although further details of peace moves by India leading to easing of the current tension are still awaited, an optimism prevails in the rings of a tangible change in the prevailing market psychology. “The market could stablise above the index level of 1,800 for the near-term but it has the potential to test the 2,000 point level if the Indian peace plan is in line with its future perceptions”,leading stock brokers felt.

Plus signs were spread all over the list, although the bulk of buying remained confined to the two volume leaders, Hub-Power and the PTCL, which holding 43 per cent weightage in the index together accounted for 131m shares, out of the total volume of 222m shares.

Energy shares, notably PSO, Shell Pakistan, Pakistan Oilfields and blue chips such as Nestle MilkPak and Grays of Cambridge were leading among the gainers, rising sharply.

Most of the gains were handsome, notably of those whose floating stock is terribly short and mostly reflected portfolio readjustments rather than fresh speculative buying.

The shares, which rose by over Rs2 were led by Adamjee Insurance, Ghani Glass, Attock Refinery, National Refinery, Lever Brothers, BOC Pakistan, ICI Pakistan, Al-Ghazi Tractors, Millat Tractors, Dawood Hercules, Fauji Fertiliser and the Engro Chemicals.

Barring the SK&F and Pak Reinsurance, Dewan Textiles, Treet Corporation and Wyeth Pakistan which suffered sharp losses others showed fractional fall and reflected lack of support rather than large selling.

Trading volume showed further expansion for the third week in a row rising to 713m shares from the previous 695m shares, the most active scrips being Hub-Power and the PTCL, accounting for 70 percent of the total.

Other actives were led by the National Bank, the PSO, KESC, the FFC-Jordan Fertiliser, Engro Chemical, the MCB, Telecard, Chakwal Cement,the ICI Pakistan, Sui Northern Gas, Adamjee Insurance, Pak PTA and several others.

FORWARD COUNTER: Speculative issues on the forward counter followed the developments on Indo-Pak standoff and rose and fell according to reports from the borders or the US-led peace moves. The most liquid scrips, notably PSO, breached through either-way of the circuit breakers and Hub-Power was traded close to.Engro Chemical and some others,however, finished on-balance on a higher note amid active trading.—Muhammad Aslam