The KSE 100-share index broke through three barriers during the last week and settled firmly well above the third at 4,418 points — up by 10 per cent or 276 points — and added over Rs56 billion to the market capitalization.
It was an unprecedented rise in a single week — a feat seldom matched by any of the neighbouring bourses — making many multimillionaires overnight.
The notable feature of the week was that the instances of strong foreign fund buying in selected shares, including the PTCL and the Hub-Power, were not wanting and their presence signals a fresh sustained run-up and new peak levels for both the index and the market capitalization in the coming weeks.
“No other mode of investment is offering a fair and quick return on investment than the share business at the moment and perhaps that is why idle funds are finding a way into it”, brokers said.
There is loud whispering about the market crash from the current levels as some quarters still believe the spectacular rise is artificial and is not backed by objective economic conditions but investors seem to have ignored this perception and are bathing in the glory of capital gains.
Stocks, therefore, maintained their upward drive as investors were not inclined to take a technical breather, an attractive bait of hefty capital gains being an inspiring factor behind their holding capacity and the sustained run-up.
Massive foreign buying in the PTCL and the Hub-Power after the announcement of the board’s meeting to be held on September 4 wherein the final dividend for the year ending on June 30, 2003 is to be notified worked as the chief stimulant. It did not allow the bulls to leave the market even at the weekend session. The Hub-Power has already paid an interim dividend at the rate of 33 per cent and the final is expected around 25 per cent.
Higher dividends announcements from some leading companies under the lead of Lakson Tobacco and some others, falling yield rates on the T-bills, and the advent of strong selective foreign buying continued to generate fresh buying almost on all counters, including the overvalued shares.
A total dividend of 255 per cent by the Shell Pakistan and 105 cash and 20 per cent bonus shares by the Lakson Tobacco did not allow the investors, notably the institutional traders to sit on the sidelines. Identical good payouts are also due from some other leading companies during the last week of the current month.
Both the KSE 100-share index and the market capitalization bettered their previous all-time record at 4,418.21 and Rs972 billion, respectively and if analysts’ predictions are correct still better levels are around in the coming weeks.
Over the week, the KSE index has risen by over 275.75 points or 9.5 per cent and indications are that its steady upward drive may end at 5,000 points, which could well push the market capitalization to $20 billion, a basic requirement for leading foreign funds to enter the emerging markets.
“The KSE index appears to be endeavouring to hit that level on the strength of strong local financial support as it will give the needed depth to the Karachi bourse “analysts said, “then how foreign funds will play is anybody’s guess”.
The sustained rally reflected that the index has recovered the losses suffered during the last two sessions of the previous week and is well-poised to resume its onward march to its next chart point of 4,500 points or above.
Massive trading volumes in the pivotals, notably the PTCL and the Hub-Power reflected that some foreign funds are in the process of testing the market’s depth and capacity to absorb the shock caused by negative external news.
But some others claim the market had risen beyond its mandate and there is a danger of a massive correction any time as some leading bears could make higher badla business an excuse for a sell-off.
No one could deny the fact that the capital gains in most of the leading shares as well as the second-liners had touched new peak levels and are claimed to be well above the analysts assessment. And that makes the market vulnerable to any correction.
The opening was, however, highly volatile as it moved either-ways what the dealers called, the fallout of the previous week’s late sell-off but the mid-session witnessed the return of the bull market and the consequent crucial rally.
The buying euphoria was so strong that investors virtually ignored the reports of heavy Indian troop movements across the Line of Control in Kashmir, apparently encouraged by the Indian denials.
The market witnessed a virtual scramble for blue chips, which have received heavy battering at the fag-end of the last week and both the leading bulls and the institutional traders were not that fool to miss the opportunity.
“The index is destined to attain its new chart point of 4,500 points and after that it is anybody’s guess”, leading analysts said”. The political situation notably the absence of consensus on the LFO issue could take its toll in the coming sessions if the showdown among the contenders of power takes an ugly turn”.
The easing of badla rates from the recent highs of about 15 to 13 per cent and predictions of further decline and steady clearing of the carryover business signalled that all is well on the technical front and there is no harm to go for covering operations at the lower levels.
The board meetings of some leading companies and the market talk of higher final dividend also generated a good of speculative buying in its shares and other energy scrips, notably the PSO, which has received massive battering during the last couple of sessions.
Energy shares also received a major boost from an increase of one to three per cent in petroleum prices in the fortnightly revision.
Floor brokers said as speculated investors ignored the fallout of political events, including the developing law and order situation in the city and chose to follow the basic market fundamentals.
Energy and auto shares, which showed sharp gains on active buying led the market advance. Leading gainers were the Al-Ghazi Tractors, the Millat Tractors, the Honda Atlas, Javed Omer, the Pakistan Oilfields, the IGI Insurance, the Shell Pakistan and the Siemens Pakistan. The largest gainer being the Wyeth Pakistan.
The National Refinery and the Pakistan Refinery shed some ground from their peak levels followed by the fears of pressure on crude oil supplies after capazing of an oil tanker, Tasman Spirit close to the Karachi Harbour, followed by the Gatron Industries, the Clariant Pakistan, the IGI Insurance, Al-Ghazi Tractors, the EFU General Insurance and some others. But late weekend short-covering allowed them to finish on balance steady.
FORWARD SECTION: Speculative issues on the forward counters followed the lead of their counterpart in the ready section and rose under the lead of the Hub-Power and the PTCL amid heavy trading. The PSO also showed smart rise from the previous lows and so did others including the MCB, the Engro Chemical, the Pakistan PTA, the Sui Northern Gas and the Fauji Fertiliser. The FFC-Jordan Fertiliser was the only exception, which suffered a modest decline despite higher profits.—Muhammad Aslam