Stocks continued to explore new highs in the preceding week as investors were not inclined to miss the bandwagon in a rising market, and literally forgot that they were playing on a weak wicket amid massive carryover volume and higher badla rates.
The Quetta massacre sent shock waves among the leading bulls and they opted for limited unloading at the weekend session. But fractional decline in the index reflects that bulls still enjoy a commanding position and may not allow further erosions when the trading resumes next week.
After breaching three barriers in June only, the index crossed the fourth barrier of 3,500 points last week, but failed to sustain the level owing to late selling triggered by the reports of a number killings in a Quetta mosque.
The jolt appears psychological rather than real accelerating the pace of weekend selling. The long-term outlook appears bullish, provided the political standoff over the LFO and other issues doesn’t take an ugly turn.
The net rise over the week was 77 points or 4.5 per cent signalling a bagful of capital gains for those who had ventured for a stake on second-liners and a host of undervalued scrips. It finally ended around 3,477.86 points after hitting the week’s peak level of 3,509 at one stage.
Starting last month from below 3,200 level, the index successfully broke through the next barrier as investors were not inclined to take a technical breather in a highly oversold market and higher badla volume and rates.
“Investors are looking beyond the 3,500 index level on the strength of current positive news and other supporting factors”, analysts said.
The KSE and market capitalization surpassed their previous all-time high level at 3,478 and Rs775 billion, respectively. Where the end will come is pretty difficult to predict in boom- like conditions.
A cut in profit rates on the National Saving Schemes and an upward revision in petroleum prices triggered heavy buying in the leading stocks as investors tried to ride the bandwagon amid market’s renewed upward drive to seek further high levels.
Analysts said predictions of a massive outflow of funds from the NSSs to stocks after 0.96 to 1.53 per cent cut in their profit rates appears to be the chief inspiring force, which has pulled the market out of the prevailing sluggishness.
“The start of new fiscal on a bullish note could well prove a fore-runner of new records, in terms of market capitalization and the meteoric rise in index in the changing political scenario”, they said adding, “but bears say a big correction is long overdue”.
Heavy buying in energy shares after fortnightly upward revision in petroleum prices was another supporting factor behind the market’s run-up, analysts said. The PSO led the advance, which rose sharply by Rs6.35 on large volume.
Adamjee Insurance was also actively traded and finished around its circuit breaker, up Rs4.45 at Rs64.35 but on the other hand the Engro Chemical, Lucky Cement, the D.G.Khan Cement and Pakistan Oilfields came in for active selling at higher levels.
“The post-budget cut in the NSSs profit rates was in line with the analysts prediction, as the government wants to see a robust market even at the cost of individual savings at least until its current privatization plan is completed according to official price perceptions”, brokers said.
The largest cut of 1.53 per cent was in the Defence Saving Certificates wherein majority wants their investment to be doubled in 10 years.
The KSE 100-share index finished with a gain of 30.07 points at 3,432.55 as compared to 3,402.48 a day earlier, reflecting the strength of leading base shares. Market capitalization also rose by Rs8.014 billion to Rs763.780 billion.
“The near-term target for the KSE now appears to be 3,600 points, and if all goes well with the investor-perception and there is no heating up of political scenario on the LFO stand, it is expected to race toward its new peak level in the months to come”, they said.
But some leading analysts say the market has already attained its best levels in the backdrop of positive backgrounds news and in the absence of fresh stimulants, the possibility of a retreat on technical grounds, alone is there.
Worries related to high cost of borrowing are there and massive volumes could cause major dents in the prevailing price structure after the unloading starts.
“Many may not agree, the market is sitting on a volcano of higher badla volume and rates, analysts said adding, “when the process of clearing starts there could be countless causalities”.
Plus signs dominated the list, with some shares whose floating stock is in few hands, rising to new peaks. The Wyeth Pakistan, for instance, rose by Rs71 without matching ready business and so did the Siemens Pakistan, the IGI Pakistan, Javed Omer Vohra and the Nestle MilkPak.
Other good gainers were led by the Jahangir Siddiqui and Co, Adamjee Insurance, Pak-Suzuki Motors, Merit Packaging, Dewan Khalid Textiles, Pakistan Resource Co, Shahtaj Sugar, the PSO and the EFU Life, which posted gains.
Prominent losers were led by the Rafhan Maize, Security Papers, Gillette Pakistan, Al-Ghazi Tractors, Mehmood Textiles, Atas Battery, Pakistan Refinery and the Mitchell’s Fruits.
FORWARD COUNTER: Speculative issues on the cleared list also followed the lead of their counterparts in the ready section and finished with good gains on active support. The PSO was major gainer up by Rs5.95 followed by the Hub-Power, which rose by 45 paisa at Rs234.95 and 38.55, respectively. The PTCL and Engro Chemical followed them, rising modestly and so did the FFC-Jordan Fertiliser but the MCB shed Rs1.10 from the early week gains.—Muhammad Aslam