BOOM-like conditions prevailed on the stock market last week as the investors continued to build long positions in most of the pivotals under the lead of Hub-Power amid market talks of a handsome final dividend.
The market’s spectacular performance was well reflected in a 13 per cent increase in the KSE 100-share index and Rs30 billion growth in the market capitalization at Rs343 billion, followed by a price flare-up in the leading blue chips, notably Adamjee Insurance, the PSO, Shell Pakistan, Hub-Power, Nestle MilkPak, Lever Brothers, Attock Refinery and several others.
The market advance was, however, led by the PTCL on massive buying ahead of the board meeting and the Hub-Power on reports that its board will meet on Nov 5 and may declare a final dividend of 30 per cent plus an interim, for the next year. The earning per share is rumoured around Rs8 to 9 on an estimated profit of Rs11 billion.
It was in this background that despite a mild weekend technical correction, stocks sustained the buying euphoria initiated by the advent of strong foreign fund and local institutional buying. The long-term outlook remained bullish owing to some visible changes in the basic economic and financial fundamentals in the backdrop of foreign aid packages.
It was a week of massive single-session as no one was inclined to miss the bandwagon and the lure of capital gains kept the investors in an upbeat mood throughout the last week.
After breaking the barrier of 1,300 and 1,400 points, the increase in the KSE 100-share index finally ended at 1,401.51 after partially reacting to 1,363.00 on late weekend selling. The total market capitalization swelled by Rs30 billion to Rs343 billion.
Two per cent cut in the discount rate by the central bank to 10 per cent was widely welcomed as it triggered strong speculative support from all and sundry but what seems to have generated general buying from most of the genuine investors was the perception of a robust economy if all the aid promised by the western world pours in and the hopes of foreign debt write-off materializes.
“The bank credits may not be that cheaper as the speculative forces make them look like as only post-cut weeks will show how the lenders treat their clientele but the reaction was positive and in line with the future investor-perception”, stock analysts at the WE financials predict. A 13 per cent increase in the index, which raised the total gain to 20 per cent during the last couple of weeks, may owe its strength to some solid insider information not shared by the local leading foreign fund managers but followed the lead more actively as was reflected by a large single-session volume of 275 million shares, they say.
The 13 per cent rise in the index means an increase of over Rs30 billion at Rs343 billion in the total market capitalization, although it needs a dozen more such pushes to attain its pre-reaction level of Rs610 billion touched in the mid-90s boom. However, the increase added to the savings of small investors significantly.
The index finally breached through the two psychological barrier of 1,300 and 1,400 points as compared to 1,267.05 at the last weekend. Volume soared to a recent peak level of 1 billion shares. The highest-ever figure is 500 million shares in a session recorded couple of years back.
It was a big rise in the backdrop of the war-like conditions but not the largest as the market has on its record half a dozen single session gains of well over 100 points including the highest some years back.
“The market virtually witnessed a scramble for the blue chips at the current levels reminiscent of boom conditions as both the bulls and the bears have joined hands to demonstrate that the bull-run will prevail”, Salman Ahmad a stock analyst at the Finex Securities say.
It was a judicious blend of massive local as well as foreign buying, reflecting that no one among them was inclined to miss the rising market at the prevailing attractively lower levels, although it was terribly selective and did not go beyond certain blue chips shares, he adds.
Apart from the big cut in the discount rate, which could well lead to cheaper credit lines for the investors, expectations of a big aid package as promised by the various visiting western ministers to compensate for the economic losses because of the US and allies attacks on Afghanistan against war on terrorism kept the market morale terribly bullish, he adds.
“It was not a single positive factor, which triggered the buystops from all and sundry but a combination of stimulating news, which did not allow the investors to sit on the sidelines”, stock analysts at the Alireza and the Moosani Securities commenting on the market’s spectacular upward journey say.
The reports of higher final dividend by the Hubco management, worrying results from the PTCL and a relative slowdown in the US attacks on Afghanistan, which investors think could lead to ceasefire in the coming days. But the 20 per cent interim dividend by the Engro Chemical (20 per cent interim already paid), fell below the market expectations as was reflected by the late selling in its shares.
The big gainers were led by the Millat Tractors, Gul Ahmed Textiles, Liberty Mills, the PSO, Al-Ghazi tractors, Glaxo-Wellcome Pakistan and the Nestle MilkPak.
But the biggest price flare-up was noted in Shell Pakistan, Lever Brothers and Wyeth Pakistan. All other shares also rose under the lead of textiles and energy sector.
The trading volume soared to 1.301 billion shares after about a year owing to heavy trading in the PTCL and the Hub-Power, which together accounted for 75 per cent of the total.
Other actives were led by the PSO, the ICI Pakistan, Adamjee Insurance, Engro Chemical, Fauji Fertiliser, Sui Northern, the MCB, Dewan Salman, Nishat Mills, hereto inactive Japan Power, still ruling well below its face at Rs3.70 and several others in other groups.—Muhammad Aslam.