Both the KSE 100-share and 30-share indexes posted fresh rise of 132.66 and 75.55 points at 13,763.16 and 16,567 respectively adding Rs40 billion to the market capital at Rs4,040bn. The question, however, actively being debated among the leading analysts, is how long the dividend –aided rally, which had caused a fresh price flare-up on most of the overvalued counters, will sustain.
The indications are that despite a lull on the privatisation front after the court order on PSO sell-off, other positive factors, including higher payout and bonus shares and strong presence of foreign investors, will continue to support the market run-up in future too, analysts said “ignoring the heating up of political scenario and law and order concerns.
The share market, therefore, confidently absorbed the negative fallout of half a per cent increase in the discount rate at 10 per cent and pressure on liquidity as a big amount is still tied to the Habib Bank’s offered (IPO) of about 53million shares.
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The interest rate hike would certainly make bank borrowing more expensive adding to industrial costs but it will also chain the monster of inflation, which has its own benefits and eventually prove a balancing economic factor, some brokers believe.
The market’s inherent strength based on higher payouts including bonus shares continued to inspire fresh covering purchases on selected counters, notably insurance, oil, cement, bank and fertiliser sectors despite to some extent discouraging news from the political front.
Despite political polarisation, law and order situation and conflicting reports about the existing setup, investors seem to have chosen to follow the market fundamentals rather than being swayed by external factors, analysts said.
The KSE 100-share index, therefore, tossed between deal or no deal between President Musharraf and Benazir Bhutto in their Dubai meeting and failed to establish any definite price pattern amid alternate bouts of buying and selling.
After either-way wide erratic movements throughout the week, it finally finished with a modest rise of 132.66 points at 13,763.16 as compared to 13,630.5 at the last weekend.
The market’s terribly cautious mood followed by conflicting reports about the outcome of the Dubai meeting was also well reflected in the turnover figure, which fell to year’s low at 163m shares as leading investors and financial traders kept to the sidelines and so did foreign buyers.
The optimists among the investors were of the view that a broad accord had been reached on major national issues between the two leaders and it might be formally signed into a deal during the next couple of weeks, analysts said.
But the pessimists think it may not be that easy for the two to meet each other’s demands, some of which relate to constitutional amendments and court proceedings, they added “the most important among them being doffing of the uniform”.
“But I think the widely speculated deal may not end the prevailing political uncertainty as other contenders of power are opposed to it, which could lead to fresh agitations”, said a leading analyst.
He warned investors not to follow suggestions of a price flare-up in post-deal market sailing and play safe as the situation is fraught with high risks in the prevailing scenario and political polarisation.
“US threats of direct hits on tribal areas, linking of the US aid to performance on the terror front and law order situation are some of the depressants, which would set the future market direction”, he added.