Stocks maintained their upward drive during last week, as both the institutional traders and the general investors continued to build long positions on all counters aided by the reports of higher corporate earnings and an attractive bait of capital gains.
There were fears among some analysts about the overdue technical correction but bulls appear to be in no mood to leave the arena for bears at least for near-term and maintained their strong hold on the market.
It was, therefore, on the strength of strong support that the market confidently absorbed the negative fallout of new price valuation rules as after a brief interruption, the KSE 100-share index resumed its sustained upward drive and settled well above the crucial level of 3,700 points.
“The widely speculated index level of 4,000 points now doesn’t look that ambitious as it had been a couple of months back”. The analysts are asking each other, “if the proposed talks between the government and opposition on the LFO prove a success and a breakthrough is made on some other issues also, it will look too small a figure”.
Both the market capitalization and the KSE 100-share index ended close to their previous all-time peak levels at Rs835.494bn and 3,751.71 respectively, recouping fully the earlier week losses. It was, however, a new peak level for the index.
Massive surplus money is floating here and there in search of gainful modes of investment. Both, real estate and share business, of late, have assumed the role of an attractive bait for prospective investors and hence current boom conditions.
Investors are following the basic bullish fundamentals rather than hearsay here and there, and that is perhaps why the bears made abortive attempts to make a case out of some changes in the rules of existing exposure limits.
However, on Tuesday, they managed to tilt the price balance in their favour after resorting to panic-selling and took along with them the weaker links but their honeymoon with the bear market proved terribly short-lived, a day’s kingship.
After having fallen by 129 points on Tuesday, the KSE 100-share index virtually raced toward its new crucial level of 3,700 points and settled well above it, reflecting the buoyant mood of the market.
The market may suffer fresh pruning when the trading resumes tomorrow amid fears how the modified valuation policy of shares deposited with the clearing house against the exposure limits will work, brokers said.
There is no cause for an alarm as the amended rules will be effective from July 28, 2003, a notice period of two weeks is sufficient to readjust positions, Moin A. Fudda, Managing Director of the KSE says.
“The clearing house is fully protected to take in any amount of selling”, he says dispelling rumours about its possible failure to absorb the tally because of an expected massive workload”, prior protective steps have already been to taken leading to smooth clearing”.
Some others claim the modified rules have been made an excuse, the real worry behind the sell-off was higher badla rates and fears about the clearing problems.
The PSO, Fauji Fertiliser, the Hub-Power, Engro Chemical, Shell Pakistan, the ICI Pakistan, the PTCL, the MCB, Tri-Pack films may witness across the board fresh selling as their ruling prices are on higher side as compared to average lower price during the last 52 weeks, according to a leading brokerage house.
“The market was in a highly overbought position and it needed correction that came in the form of amended exposure rules”, analysts said adding “but the weakness of energy shares after a 50 per cent cut in free-of-cost oil by Saudi Arabia may not be easily digested in the coming weeks”.
There was a near-panic in the market after a notice about the changes in exposure limits, and new valuation policy reached the market and there were fears that it will collapse any time during the session but late institutional support at dips limited the decline.
Owing to market’s meteoric rise during the last about six weeks and being in a highly overbought position, there were fears among regulatory authorities about its possible collapse on the badla account and they decided to take some corrective measures, analysts said.
“Regular clearing of badla business despite at higher rates, however, indicate that brokerage houses are working within their exposure limits and there were no fears of default on the part of any active one”, they said.
However, the opening was on the higher side, what the dealers called, the extension of previous run-up as the index touched the week’s highest at 3,730 before coming in selling.
The early selling was confined to the volume leaders, while major fall was noted in the Shell Pakistan, the PSO, Pakistan Oilfields, Fauji Fertiliser, Adamjee Insurance and the ICI Pakistan followed by most of the secondliners barring the cement sector, which maintained its upward drive. All of them finished fully recovered thanks to mid-week massive institutional covering purchases followed by some second thought on new valuation rules.
Energy shares came in for strong selling followed by reports that the Saudi government has reduced the concessional oil facility but resumed their upward drive after official clarification about the Saudi step.
Major losers were led by the Glaxo-SKF, the BOC Pakistan, Javed Omer, while some managed to finish with extended gains on late short-covering in line with the broader market.
Some leading shares managed to put on good gains under the lead of Janan Demalucho Textiles, Al-Abbas Sugar, Sindh Alkalis, Bestway Cement, Gadoon Textiles, Pakistan Services, and National Refinery.
FORWARD COUNTER: Speculative issues on the forward counter also followed the lead of their counterparts in the ready section and finished sharply higher under the lead of the PSO, the MCB, the FFC-Jordan Fertiliser, the PTCL, the Hub-Power and the Pak PTA.—Muhammad Aslam