The KSE 100share index last week firmly settled above the twicehit coveted level of 2,100 points. Despite the post election political standoff, it appears to be heading to set a new record during the next couple of weeks in the backdrop of reports of higher corporate earnings and smooth transfer of power to elected members.
Massive buying in the PSO, notably on the forward counter where some strategic foreign investors lifted more than 100 million shares during the week in a bid to corner the floating stock ahead of its imminent selloff seems to have altogether changed the future market outlook. Leading analysts are predicting the index level of 2,500 points not in a distant future, if the foreign support was sustained.
Reports of a phasedpullout of the Indian troops from the Pakistani borders, the sharp increase in petroleum prices and a strong speculative buying by some leading institutional traders gave the needed boost to a market weighed down by the post election political uncertainties in the backdrop of a split mandate.
After initial decline, the KSE index finished higher around 2,112.05 point, highest so far as compared to previous week’s 2,036.39 point, up 71.88 points or five per cent in the post election week, despite the political uncertainty as a search for a consensus government still appears to be far off. The market capitalization rose to Rs482 billion from the previous Rs466 billion, up Rs15 billion.
The contenders of power remained engaged in trying to win over others to form a government in the centre, but until the close of the week, the situation was unclear.
However, after a technical breather, the institutional traders refused to sit idle on the sidelines and resumed speculative buying in the energy and other shares, where dividend announcements were due.
The postelection political scenario is still unclear in regard to a stable government at the centre, and until the investors find a cue of the coming political events they will play safe. Financial institutions as well as institutional traders could have another line of thinking backed by their strong liquidity positions and capacity to take financial risks.
The return of a bull market in the backdrop of many ifs and buts surprised many leading stock analysts but without comments and preferred to keep silent awaiting the market’s next move, one broker said.
Auto and fertilizer shares, however, did not follow the market’s general trend and rose sharply on active support aided by the market talk of higher earnings and expectations of handsome payouts.
After having fallen early by 100 points, the KSE 100share index staged a a smart recovery towards the close and finished with a sharp rise as bulls fought back and made extensive short covering at the weekend lows in the pivotals.
The breach through the psychological barrier of 2,100 points twice during the pre and postelections shows some basic changes in the inherent market psychology, apparently based on bullish economic fundamentals and higher corporate eranings.
“I will not call it an inspired support from some invisible quarters to allay the fears that the election results were not that bad for the market”, says a leading stock analyst “but there are not many genuine reasons to be happy until the new government was in place”.
Some of the investment banks, notably those having strong links with the Gulf money and local institutional traders were active among the buyers on the blue chip counters at lower levels where risks of a major fall were remote.
“But if the spilt mandate in typical Pakistani conditions was any indication, the market boost may be deceptive in a broader future perception”, most brokers believe “snap rallies in the backdrop of an expected political polarization could be attractive not in the final analysis”.
The general perception was that the market could erode a couple of more points until a clear picture emerges on the political front, notably the shape of the coalition government in centre but bulls were not inclined to be sidelined at this crucial juncture and behaved contrary to analysts predictions.
Apart from the fallout of election results, combined the with fears of political instability, the early steep decline was also attributed to press reports later denied by the ministry of petroleum that the selloff of state stakes in the PSO had been deferred.
The preelection official statements said it will be sold to strategic investors during the current month as shortlisting of a couple of parties had already been made.
Top gainers were led by the Fauji Fertiliser, the Security Papers, the PakSuzuki Motors, the Mitchell’s Fruits and the Pak Resource Company, the Wyeth Pakistan, the General Tyre, the Shell Pakistan, the PSO, the Indus Motors, the Unilever Pakistan, and several others.
Leading losers were led by some of the MNCs including the Abbott Lab, the Shell Gas, Shafiq Textiles and many other local leading shares. A sharp rise in the Pak Reinsurance Company was witnessed following the reports of bonus shares in the ratio of 1:9.
Reports that the National Bank’s recent selloff of five per cent shares was highly oversubscribed failed to boost the value of share, although it continues to be an attractive bait for future investment.
The trading volume showed a modest rise at 747 million shares bulk of which went to the credit of the HubPower, the PSO, the PTCL and the Engro Chemical ahead of its board meeting on Oct 22.
Other actives were led by the Sui Northern, the Fauji Fertiliser, the FFCJordan Fertiliser, the National Bank, the MCB, the ICP SEMF, the Chakwal Cement, the ICI Pakistan, the Adamjee Insurance, the Telecard, the Bank of Punjab and several others.
FORWARD COUNTER: Strong foreign buying in the PSO ahead of its privatization before the year has outfeatured trading on this counter where the HubPower, the PTCL, the Engro Chemical, the Fauji Fertiliser and the Sui Northern were also actively traded daily. All shares onbalance finished higher, largest gain being in the PSO, which at one stage traded as higher as Rs170. The Engro Chemical also rose appreciably.—Muhammad Aslam